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From Workplace to Residence: The Spillover Effects of Minimum Wage Policies on Local Housing Markets

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  • Borg, Gabriele
  • Passaro, Diego Gentile
  • Hermo, Santiago

Abstract

The recent rise of sub-national minimum wage (MW) policies in the US has resulted in significant dispersion of MW levels within urban areas. In this paper, we study the spillover effects of these policies on local rental markets through commuting. To do so, for each USPS ZIP code we construct a "workplace" MW measure based on the location of its resident's jobs, and use it to estimate the effect of MW policies on rents. We use a novel identification strategy that exploits the fine timing of differential changes in the workplace MW across ZIP codes that share the same "residence" MW, defined as the same location's MW. Our baseline results imply that a 10 percent increase in the workplace MW increases rents at residence ZIP codes by 0.69 percent. To illustrate the importance of commuting patterns, we use our estimates and a simple model to simulate the impact of federal and city counterfactual MW policies. The simulations suggest that landlords pocket approximately 10 cents of each dollar generated by the MW across directly and indirectly affected areas, though the incidence on landlords varies systematically across space.

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  • Borg, Gabriele & Passaro, Diego Gentile & Hermo, Santiago, 2022. "From Workplace to Residence: The Spillover Effects of Minimum Wage Policies on Local Housing Markets," SocArXiv zj2sm_v1, Center for Open Science.
  • Handle: RePEc:osf:socarx:zj2sm_v1
    DOI: 10.31219/osf.io/zj2sm_v1
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    References listed on IDEAS

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    1. 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.
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    3. Justin H. Leung, 2021. "Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices," The Review of Economics and Statistics, MIT Press, vol. 103(4), pages 754-769, October.
    4. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    5. Yamagishi, Atsushi, 2019. "Minimum Wages and Housing Rents: Theory and Evidence from Two Countries," MPRA Paper 94238, University Library of Munich, Germany.
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