Working Paper: NBER ID: w30311
Authors: Jonathan Vogel
Abstract: I generalize the canonical model--in which relative supply and demand for worker skills shape the skill premium--incorporating monopsony power, minimum wages, and unemployment. I estimate the extended canonical model using national data and, separately, state-level data. I show that incorporating the minimum wage improves the out-of-sample fit of the traditional canonical model. I document that minimum wages--together with supply and demand--play a central role in shaping the evolution of the U.S. college premium and the differential evolution of state-level college premia. Lending credibility to these conclusions, the state and national estimates are not only qualitatively, but also quantitatively consistent.
Keywords: No keywords provided
JEL Codes: E24; J0; J23; J31; J42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real minimum wage (J38) | US college premium (I23) |
| decline in real minimum wage (J38) | increase in skill premium (J24) |
| slowdown in relative supply growth (O49) | increase in skill premium (J24) |
| minimum wage changes (J38) | skill premium dynamics (J24) |
| state-level minimum wages (J38) | differential evolution of college premia (D29) |
| relative college supply (Q21) | skill premium (J24) |