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.
Authors
CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.
Daniel Aaronson
Sumit Agarwal
Journal article details
- DOI
- 10.1257/aer.102.7.3111
- Publisher
- American Economic Association
- JEL
- D12, D14, D91, J38
- Issue
- Volume 102, No. 7, December 2012, pages 3111-39
Suggested citation
D, Aaronson and S, Agarwal and E, French. (2012). 'The Spending and debt response to minimum wage hikes' 102, No. 7(2012), pp.3111–39.
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