Date Added: Nov 2010
The authors use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. The approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. They compare all contiguous county-pairs in the United States that straddle a state border and find no adverse employment effects. They show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. The findings are robust to allowing for long-term effects of minimum wage changes.