EconStor >
Forschungsinstitut zur Zukunft der Arbeit (IZA), Bonn >
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA) >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/58492
  
Title:Less myth, more measurement: Decomposing excess returns from the 1989 minimum wage hike PDF Logo
Authors:Lin, Carl
Issue Date:2012
Series/Report no.:Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6269
Abstract:In the book Myth and Measurement, Card and Krueger (1995) examine the economic impact of the 1989 minimum wage hike on the welfare of 110 firms which employ a disproportionate number of minimum-wage workers. Their results show mixed evidence that excess returns associated with news about the 1989 minimum-wage legislation. This paper re-examines this question by decomposing excess returns. Our simple and intuitive approach attributes excess returns to either differences in market performances (economy-wide factors) or firm-specific traits (individualistic factors). We likewise show that, generally, minimum wage legislation had little or no effect on employer wealth. However, by decomposing total excess returns, we find that the apparent lack of an effect is a consequence of two off-setting forces: (1) a negative effect arising from firm-specific traits (adverse information on minimum-wage worker employers) and (2) a positive effect arising from market performance. In other words, we show that while the aggregate effect of the 1989 minimum wage hike was neutral, there was a significant negative impact on firms that was neutralized by positive market performance.
Subjects:minimum wage
excess returns
decomposition
JEL:G14
J31
J38
Persistent Identifier of the first edition:urn:nbn:de:101:1-201203063989
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

Files in This Item:
File Description SizeFormat
715136100.pdf237.88 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/58492

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.