The Spending and Debt Response to Minimum Wage Hikes
- (pp. 3111-39)
Abstract
Immediately following a minimum wage hike, household income rises on average by about $250 per quarter and spending by roughly $700 per quarter for households with minimum wage workers. Most of the spending response is caused by a small number of households who purchase vehicles. Furthermore, we find that the high spending levels are financed through increases in collateralized debt. Our results are consistent with a model where households can borrow against durables and face costs of adjusting their durables stock. (JEL D12, D14, D91, J38)Citation
Aaronson, Daniel, Sumit Agarwal, and Eric French. 2012. "The Spending and Debt Response to Minimum Wage Hikes." American Economic Review, 102 (7): 3111-39. DOI: 10.1257/aer.102.7.3111Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D14 Personal Finance
- D15 Intertemporal Consumer Choice; Life Cycle Models and Saving
- J38 Wages, Compensation, and Labor Costs: Public Policy