Minimum wage effects across heterogeneous markets

Hiroko Okudaira, Miho Takizawa, Kenta Yamanouchi

Research output: Contribution to journalArticle

Abstract

Previous studies have reached little consensus on the employment effect of the minimum wage. This paper argues that local labor markets are heterogeneous, in that the impact of the minimum wage is concentrated in specific markets. In particular, we estimate the extent of surplus between each plant's value of marginal product of labor and wage rate and examine whether the minimum wage impact varies across markets with a differential surplus. Building on the recent policy changes in Japan, we find that the employment effect of an increase in the minimum wage is significant and negative in plants for which the value of marginal product of labor is close to the wage rate and which experienced little surplus pre-reform. The minimum wage increases have little employment effect on plants with a relatively high surplus, even when they have a significant number of minimum wage employees.

Original languageEnglish
JournalLabour Economics
DOIs
Publication statusPublished - 2019 Jan 1

Fingerprint

Minimum wage
Surplus
Employment effects
Labor
Wage rate
Marginal product
Employees
Japan
Local labour markets
Policy change

Keywords

  • Minimum wage
  • Monopsonistic labor market
  • Production function estimation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Organizational Behavior and Human Resource Management

Cite this

Minimum wage effects across heterogeneous markets. / Okudaira, Hiroko; Takizawa, Miho; Yamanouchi, Kenta.

In: Labour Economics, 01.01.2019.

Research output: Contribution to journalArticle

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