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Minimum Wages And Gross Domestic Product

Author

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  • Joseph J. Sabia

Abstract

type="main" xml:id="coep12099-abs-0001"> This study is the first to explore the relationship between minimum wage increases and state gross domestic product (GDP). Using data drawn from the Bureau of Economic Analysis (BEA) and the Current Population Survey (CPS) from 1979 to 2012, I find no evidence that minimum wage increases were associated with changes in overall state GDP. However, this null finding masks substantial heterogeneity in the productivity effects of minimum wages across industries and over the business cycle. Difference-in-difference-in-difference estimates suggest that a 10% increase in the minimum wage is associated with a short-run 1% to 2% decline in state GDP generated by lower-skilled industries relative to more highly skilled industries. This differential appears larger during troughs as compared to that during peaks of the state business cycle . ( JEL J3, J4, L5)

Suggested Citation

  • Joseph J. Sabia, 2015. "Minimum Wages And Gross Domestic Product," Contemporary Economic Policy, Western Economic Association International, vol. 33(4), pages 587-605, October.
    • Handle: RePEc:bla:coecpo:v:33:y:2015:i:4:p:587-605
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    File URL: http://hdl.handle.net/10.1111/coep.2015.33.issue-4
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    Citations

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    Cited by:

    1. Chu, Angus C. & Kou, Zonglai & Wang, Xilin, 2020. "Dynamic effects of minimum wage on growth and innovation in a Schumpeterian economy," Economics Letters, Elsevier, vol. 188(C).
    2. Brandyn F. Churchill & Joseph J. Sabia, 2019. "The Effects of Minimum Wages on Low‐Skilled Immigrants’ Wages, Employment, and Poverty," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(2), pages 275-314, April.
    3. Dr. Nickolaos Giovanis, 2018. "Determining Factors of Minimum Wage in the Member States of the OECD," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 1(4), pages 93-101, 12-2018.
    4. Fone, Zachary S. & Sabia, Joseph J. & Cesur, Resul, 2023. "The unintended effects of minimum wage increases on crime," Journal of Public Economics, Elsevier, vol. 219(C).
    5. Joseph J. Sabia, 2015. "Do minimum wages stimulate productivity and growth?," IZA World of Labor, Institute of Labor Economics (IZA), pages 221-221, December.
    6. Dr. Nickolaos Giovanis, 2019. "“Determining Factors of Minimum Wage in the Member States of the OECDâ€," Sumerianz Journal of Business Management and Marketing, Sumerianz Publication, vol. 2(1), pages 6-14, 01-2019.
    7. Afonso António & Jalles João Tovar & Venter Zoe, 2023. "Minimum wage and collective bargaining shocks: a narrative database for advanced economies," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 13(1), pages 1-18, January.
    8. António Afonso & João Tovar Jalles & Zoe Venter, 2022. "Minimum Wage and Collective Bargaining Reforms: A Narrative Database for Advance Economies," CESifo Working Paper Series 9692, CESifo.

    More about this item

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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