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Card and Krueger (1994) - Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania

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Economics (Arts)
ECON 426
Sonya Laszlo

Daniel Goh (McGill ID: 260305028) ECON 426, Article Summary 12 October 2011 SUMMARY Title: Minimum Wages and Employment: A Case Study of the Fast-Food Industry in New Jersey and Pennsylvania Authors: David Card, Alan B. Krueger Source: American Economic Review Date: September 1994 Keywords: Employment, Minimum Wage, Prices Main hypotheses/questions: • What is the effect of an increase in minimum wage on establishment level employment and product price outcomes? Main results: • The increase in minimum wage did not decrease employment in the fast-food chains surveyed; in fact, employment increased following the minimum wage increase. • Prices in fast-food restaurants in New Jersey increased higher in comparison to restaurants in Pennsylvania. Literature review: • This investigation builds on studies that have found mixed results, but with the general conclusion that increases in minimum wage do not have significant adverse impacts on employment (Card 1992, Lawrence F. Katz and Krueger 1992, Stephen Machin and Alan Manning1994). Frontier: Effects of minimum wage increases on employment and prices. Data: • Data was collected in two waves before (late February and early March 1992) and after (November and December 1992) the minimum wage increase in fast-food restaurants in Pennsylvania and New Jersey. • To investigate the effect of the minimum wage increase on entry into the fast-food industry, investigators utilized McDonald’s national restaurant directories and compared numbers of newly opened restaurants over different states in a period from 1986 to 1991. • Data from the Current Population Survey (CPS) from 1991 to
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