The Spending and Debt Response to Minimum Wage Hikes
Daniel Aaronson, Sumit Agarwal, Eric French
American Economic Review · 2012 · Volume 102 · Issue 7
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)
Keywords
Consumer Economics: Empirical Analysis, Personal Finance, Intertemporal Consumer Choice, Life Cycle Models and Saving, Wages, Compensation, and Labor Costs: Public Policy
Enable JavaScript for citation tools and additional paper interactions.