Here.
He mentions the Neumark and Wascher study, but does not mention Dube, Lester, and Reich, who reproduce Card and Krueger with even better data than Neumark and Wascher (they do cross-border analyses for every state border experiencing a minimum wage change over the course of about a decade). I had heard of - but did not really know - the Dube, Lester, and Reich paper before this recent discussion, but it will be the the obligatory reference sort of like Card/Krueger and Neumark/Wascher have been - so it's worth linking to again.
I have read chunks of Pissarides's book on equilibrium unemployment theory but I still don't feel entirely fluent in the search theoretic versions of monopsony that are most appropriate to thinking about the turnover questions that Henderson raises.
David also has this point on prices, from his review of Card and Krueger:
"Interestingly, Card's and Krueger's own data on price contradict one of the implications of monopsony. If monopsony is present, a minimum wage can increase employment. These added employees produce more output. For a given demand, therefore, a minimum wage should reduce the price of the output. But Card and Krueger find the opposite. They write: '[P]retax prices rose 4 percent faster as a result of the minimum-wage increase in New Jersey...' (p. 54). If their data on price are to be believed, they have presented evidence against the existence of monopsony."
What do people think of this? Again, my limitations with these models makes me unclear on the implications for prices, although this sounds sensible. It is a little odd to embrace Card and Krueger's price data but reject his wage data.
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I haven't read their paper, and I'm certainly not familiar enough with this literature to give you an answer, Daniel. But I can at least clear this one up:
ReplyDeletet is a little odd to embrace Card and Krueger's price data but reject his wage data.
I think what David was pointing out, is that C&K's own story doesn't really hold up. It's not that he choosing price data and throwing out wage data. Rather, he's saying *all* of their reported data put together, doesn't support the story they're painting. They're explaining the data by a monopsony story, yet DRH is claiming that story won't fit their own price data.
E.g. if a witness contradicts himself on the stand, and the defense attorney points this out, it would be weird for the prosecutor to say later, "So which is it? It's weird that our friend the defense counsel accepts statement A, but not statement B, from my witness."
Well right, but then the data is just giving an inconsistent picture. Part of it supports monopsony and part of it doesn't. You wouldn't think you'd make any more of this than you would make of their wage results if you are inclined not to believe their wage results because of data issues.
DeleteOf course, if you think their data is imperfect but worth considering then you have to say they have some mixed signals in the results.
This seems to me like the prosecutor relying on statement B after demonstrating the witness is unreliable.
My case of course is that that the witness is reliable and we've got some things we need to reconcile. But if you don't think the witness is reliable it's not clear why you'd remark on that.
Anyway - as someone who thinks that C&K's data obviously aren't perfect but their method is very good I'm more curious about the details of what monopsony theory allows for in the product market - I'm not sure. But I didn't think David thought much of the data in the first place.
What Bob said above.
DeleteStep 1: I think their data on employment are lousy.
Step 2: I don't know whether their data on prices are lousy. I didn't look at that closely.
Step 3: C&K discuss their data as if they think both sets of data are good.
Step 4: If their assumption in Step 3 is right, then their story doesn't hold together.
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"For a given demand" is in the wrong direction, as demand should increase due to those with higher propensities to spend having more money. You can argue not because employers have less to invest, but this is only if they invest in the same locales employees spend, which isn't too likely, and increases in asset values affect prices in the same manner as consumption, which also isn't likely. Nor should we assume it is all a story of monopsony. In so far as demand for minimum wage produced goods and services are less elastic than others, prices can be raised, transferring money from those with higher incomes to lower ones. If they have lower propensities to consume, the same applies to them.
ReplyDelete