Journal of Labor Research

, Volume 29, Issue 4, pp 303–317 | Cite as

Effects of Minimum Wages on Youth Employment: the Importance of Accounting for Spatial Correlation

Article

Abstract

The relationship between minimum wage increases and youth employment is investigated using county-level data and spatial econometric techniques. Results that account for spatial correlation indicate that a 10% increase in the effective minimum wage is associated with a 3.2% decrease in youth employment, a result that is 28% higher than the corresponding estimate that does not control for spatial correlation. Thus, estimates that do not take into account spatial correlation may significantly underestimate the negative effect of the minimum wage on teenage employment. Improperly controlling for factors that vary systematically over space can lead to incorrect inferences and misinform policy.

Keywords

Spatial econometrics Spatial autoregressive model Minimum wage Youth employment 

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Department of EconomicsOhio UniversityAthensUSA
  2. 2.Department of EconomicsOhio UniversityAthensUSA

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