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The Economic and Social Impact of Minimum Wage

Author

Listed:
  • Dan ARMEANU

    (The Bucharest University of Economic Studies)

  • Carmen PASCAL

    (The Bucharest University of Economic Studies)

Abstract

This paper analyzes a matter of concern and of real interest to economists, employers and the political class, on the impact of minimum wage on unemployment and employment rates. The economic theory shows a positive link between the minimum wage and unemployment. The literature, however, shows no sign of a clear result on this relationship. This work aims to study the relevance of this statement for the Romanian economy, using different econometric methods. The article contains multiple models and approachesto test the nature of these dependencies, such as: cluster analysis, conditional correlation, regression estimation, variance decomposition and testing Granger causality using autoregressive vectors.These are complementary and, in the end, help us reach an unanimous conclusion

Suggested Citation

  • Dan ARMEANU & Carmen PASCAL, 2017. "The Economic and Social Impact of Minimum Wage," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 51(3), pages 57-72.
    • Handle: RePEc:cys:ecocyb:v:50:y:2017:i:3:p:57-72
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    References listed on IDEAS

    as
    1. Jonathan Meer & Jeremy West, 2016. "Effects of the Minimum Wage on Employment Dynamics," Journal of Human Resources, University of Wisconsin Press, vol. 51(2), pages 500-522.
    2. Card, David & Krueger, Alan B, 1994. "Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania," American Economic Review, American Economic Association, vol. 84(4), pages 772-793, September.
    3. Addison, John T. & Blackburn, McKinley L. & Cotti, Chad D., 2013. "Minimum wage increases in a recessionary environment," Labour Economics, Elsevier, vol. 23(C), pages 30-39.
    4. Helmut Lütkepohl, 2013. "Vector autoregressive models," Chapters, in: Nigar Hashimzade & Michael A. Thornton (ed.), Handbook of Research Methods and Applications in Empirical Macroeconomics, chapter 6, pages 139-164, Edward Elgar Publishing.
    5. Domonkos F Vamossy, 2014. "Relationship between Youth Unemployment and Minimum Real Wage: An Empirical Analysis of the Hungarian Labor Market Using Multivariate Least Squares Regression Analysis," Proceedings of FIKUSZ '14, in: Pál Michelberger (ed.),Proceedings of FIKUSZ '14, pages 285-290, Óbuda University, Keleti Faculty of Business and Management.
    6. John Schmitt, 2013. "Why Does the Minimum Wage Have No Discernible Effect on Employment?," CEPR Reports and Issue Briefs 2013-04, Center for Economic and Policy Research (CEPR).
    7. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
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    Cited by:

    1. Aya, Achour & Chafik , Omar, 2019. "Salaire minimum au Maroc : faits stylisés et impacts économiques," Document de travail 2019-3, Bank Al-Maghrib, Département de la Recherche.

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    More about this item

    Keywords

    minimum wage; macroeconomic variables; cluster analysis; Granger causality; VAR; conditional correlations.;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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