Are There Long-Run Effects of the Minimum Wage?

Isaac Sorkin

Review of Economic Dynamics, 2015, vol. 18, issue 2, 306-333

Abstract: An empirical consensus suggests that there are small employment effects of minimum wage increases. This paper argues that these are short-run elasticities. Long-run elasticities, which may differ from short-run elasticities, are policy relevant. This paper develops a dynamic industry equilibrium model of labor demand. The model makes two points. First, long-run regressions have been misinterpreted because even if the short- and long-run employment elasticities differ, standard methods would not detect a difference using US variation. Second, the model offers a reconciliation of the small estimated short-run employment effects with the commonly found pass-through of minimum wage increases to product prices. (Copyright: Elsevier)

Keywords: Labor demand; Putty-clay; Minimum wages; Dynamic models (search for similar items in EconPapers)
JEL-codes: D24 E22 J23 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (121)

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DOI: 10.1016/j.red.2014.05.003

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