Working Paper: CEPR ID: DP12539
Authors: Claus T. Kreiner; Daniel Reck; Peer Ebbesen Skov
Abstract: We estimate the impact of youth minimum wages on youth employment by exploiting a large discontinuity in Danish minimum wage rules at age 18, using monthly payroll records for the Danish population. The hourly wage jumps up by 40 percent at the discontinuity. Employment falls by 33 percent and total input of hours decreases by 45 percent, leaving the aggregate wage payment almost unchanged. We show theoretically how the discontinuity may be exploited to evaluate policy changes. The relevant elasticity for evaluating the effect on youth employment of changes in their minimum wage is in the range 0.6-1.1.
Keywords: minimum wage; policy; employment; regression discontinuity
JEL Codes: J2; J3; H2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| minimum wage increase (J38) | decrease in youth employment (F66) |
| job loss at age 18 (J63) | lower employment rates post-18 (J68) |