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Spillover Bias in Cross-Border Minimum Wage Studies: Evidence from a Gravity Model

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  • Daniel Kuehn

    (Research Associate I, The Urban Institute)

Abstract

This paper explores the problem of spillover bias in cross-border studies of the minimum wage using a commuter gravity model on county-level data from 2009 to 2013. Commuter flows conform to the expectations of the gravity equation, but flows across county borders are sensitive to changes in the minimum wage rate, which implies that minimum wage employment effect estimates using contiguous counties are likely to suffer from spillover bias. One way to address this bias is to include a control ring between treatment and comparison counties, although this solution may introduce biases of its own. A gravity model that includes a control ring affirms that this alternative comparison group can address this spillover bias problem.

Suggested Citation

  • Daniel Kuehn, 2016. "Spillover Bias in Cross-Border Minimum Wage Studies: Evidence from a Gravity Model," Journal of Labor Research, Springer, vol. 37(4), pages 441-459, December.
    • Handle: RePEc:spr:jlabre:v:37:y:2016:i:4:d:10.1007_s12122-016-9234-3
    DOI: 10.1007/s12122-016-9234-3
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    Cited by:

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    2. Laws, A., 2018. "Do minimum wages increase search effort?," Cambridge Working Papers in Economics 1857, Faculty of Economics, University of Cambridge.
    3. Ranjan, Priya & Neumark, David & Rodriguez-Lopez, Antonio, 2022. "What's across the Border? Re-Evaluating the Cross-Border Evidence on Minimum Wage Effects," IZA Discussion Papers 15282, Institute of Labor Economics (IZA).
    4. Petra E. Todd & Weilong Zhang, 2022. "Distributional Effects of Local Minimum Wages: A Spatial Job Search Approach," NBER Working Papers 30668, National Bureau of Economic Research, Inc.
    5. Perez Perez, Jorge, 2020. "City Minimum Wages and Spatial Equilibrium Effects," SocArXiv fpx9e, Center for Open Science.
    6. Devereux, Kevin & Studnicka, Zuzanna, 2024. "Non-monotonic employment effects by market structure and minimum wage level," CLEF Working Paper Series 66, Canadian Labour Economics Forum (CLEF), University of Waterloo.
    7. Dharmasankar, Sharada & Yoo, Hoyoung, 2023. "Assessing the main and spillover effects of Seattle's minimum wage on establishment decisions," Regional Science and Urban Economics, Elsevier, vol. 99(C).
    8. Sigbjørn Sødal, 2017. "A Gravity Approach to Constructing Regional Structures from Interregional Flow Data," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 23(4), pages 361-377, November.
    9. Shirley, Peter, 2018. "The response of commuting patterns to cross-border policy differentials: Evidence from the American Community Survey," Regional Science and Urban Economics, Elsevier, vol. 73(C), pages 1-16.
    10. McKinnish, Terra, 2017. "Cross-state differences in the minimum wage and out-of-state commuting by low-wage workers," Regional Science and Urban Economics, Elsevier, vol. 64(C), pages 137-147.

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