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Two Ways to Tell the Story

Summary:
From Paul Krugman today:The most famous example is the research that Card conducted along with the late Alan Krueger on the effects of minimum wage. Most economists used to believe that raising the minimum wage reduces employment. But is this true? In 1992 the state of New Jersey increased its minimum wage while neighboring Pennsylvania didn’t. Card and Krueger realized that they could assess the effect of this policy change by comparing employment growth in the two states after the wage hike, essentially using Pennsylvania as the control for New Jersey’s experiment.What they found was that the increased minimum wage had very little if any negative effect on the number of jobs....So the empirical revolution in economics undermines the right-leaning conventional wisdom that had

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 From Paul Krugman today:

The most famous example is the research that Card conducted along with the late Alan Krueger on the effects of minimum wage. Most economists used to believe that raising the minimum wage reduces employment. But is this true? In 1992 the state of New Jersey increased its minimum wage while neighboring Pennsylvania didn’t. Card and Krueger realized that they could assess the effect of this policy change by comparing employment growth in the two states after the wage hike, essentially using Pennsylvania as the control for New Jersey’s experiment.

What they found was that the increased minimum wage had very little if any negative effect on the number of jobs....

So the empirical revolution in economics undermines the right-leaning conventional wisdom that had dominated discourse.

From David Henderson today:

Messrs. Card and Krueger conducted a famous natural experiment by studying employment at fast-food restaurants in New Jersey and Pennsylvania before and after New Jersey raised the minimum wage while Pennsylvania didn’t. Contrary to what one might expect, employment in New Jersey’s fast-food restaurants rose slightly relative to employment in Pennsylvania’s. On this basis, they challenged standard supply-and-demand models of the effects of minimum wages. Unfortunately, Messrs. Card and Krueger’s data weren’t so great—they gathered it by phoning restaurants.

University of California Irvine economist David Neumark and Federal Reserve economist William L. Wascher, using the restaurants’ payroll data, found what most economists would have expected: The minimum wage increase in New Jersey caused employment to fall in the New Jersey restaurants relative to Pennsylvania restaurants’ employment.

Greg Mankiw
I am the Robert M. Beren Professor of Economics at Harvard University, where I teach introductory economics (ec 10). I use this blog to keep in touch with my current and former students. Teachers and students at other schools, as well as others interested in economic issues, are welcome to use this resource.

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