Do lower minimum wages for young workers raise their employment? Evidence from a Danish discontinuity
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The ESRI organises a public seminar series, inviting researchers from both the ESRI and other institutions to present new research on a variety of public policy issues. The seminar series provides access to specialised knowledge and new research methodologies, with the objective of promoting research excellence and facilitating productive dialogue across the policy and research fields.
Daniel Reck, Department of Economics, London School of Economics
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.
Daniel Reck is an Assistant Professor of Economics at the London School of Economics. His research interests are primarily in behavioral welfare economics and public economics. More broadly, he takes an interest in the combination of administrative datasets and theoretical reasoning to study a variety of topics in applied microeconomics. His recent research projects include the effect of recent enforcement efforts on tax evasion via offshore accounts in the US, the development and application of tools for recovering preferences from choice data when seemingly arbitrary factors like defaults affect choice, the optimal design of defaults, and the effects of minimum wage rules on youth employment.