Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations

35 Pages Posted: 29 Aug 2002

See all articles by Pedro Portugal

Pedro Portugal

Bank of Portugal - Research Department; New University of Lisbon; IZA Institute of Labor Economics

Ana Rute Cardoso

Instituto de Analisis Economico (IAE-CSIC); Barcelona Graduate School of Economics (Barcelona GSE); IZA Institute of Labor Economics

Date Written: August 2002

Abstract

Changes in the legislation in the mid-80s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, as the minimum wage increased sharply for a very specific group of workers. Relying on a matched employer employee panel data set, we model gross worker flows - accessions and separations - in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. Employment trends for teenagers, the affected group, are contrasted to those of older workers, before and after the raise in the youth minimum wage. The major effect on teenagers of a rising minimum wage is the reduction of separations from the employer, which compensates for the reduction of accessions to new and continuing firms. In this sense, our results can reconcile some of the previous evidence that has been presented in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow.

Keywords: Minimum Wage, Employment

JEL Classification: D21, J23, J38

Suggested Citation

Portugal, Pedro and Cardoso, Ana Rute, Disentangling the Minimum Wage Puzzle: An Analysis of Worker Accessions and Separations (August 2002). Available at SSRN: https://ssrn.com/abstract=323598

Pedro Portugal (Contact Author)

Bank of Portugal - Research Department ( email )

Av. Almirante Reis 71, 6th
Lisbon 1150-012
Portugal
+351 21 313 0000 (Phone)
+351 21 814 3841 (Fax)

New University of Lisbon

Lisbon, 1099-085
Portugal

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ana Rute Cardoso

Instituto de Analisis Economico (IAE-CSIC) ( email )

Campus UAB
Barcelona, Bellaterra 08193
Spain
3436917157 (Phone)

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
492283894508 (Phone)
492273894510 (Fax)

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