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Who Pays for the Minimum Wage?

Lindner, A; Harasztosi, P; (2019) Who Pays for the Minimum Wage? American Economic Review , 102 (4) i-vii. 10.1257/aer.102.4.i. Green open access

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Abstract

This paper provides a comprehensive assessment of the margins along which firms responded to a large and persistent minimum wage increase in Hungary. We show that employment elasticities are negative but small even four years after the reform; that around 75 percent of the minimum wage increase was paid by consumers and 25 percent by firm owners; that firms responded to the minimum wage by substituting labor with capital; and that dis-employment effects were greater in industries where passing the wage costs to consumers is more difficult. We estimate a model with monopolistic competition to explain these findings.

Type: Article
Title: Who Pays for the Minimum Wage?
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.102.4.i
Publisher version: https://doi.org/10.1257/aer.102.4.i
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/10072193
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