The Prize Committee consisted of Bruce Weinberg (chair), Jesse Rothstein, and previous winners William Kerr and William Lincoln. The committee identified many excellent articles, using a variety of strong methodologies to address interesting and important topics. Giuliano’s piece stood out from even this impressive cohort.
Giuliano’s paper contributes to the literature on minimum wage effects on employment. Though this topic is one of the most studied in labor economics, Giuliano manages to shed new light on it. She exploits an innovative data set, describing employment at each store in a large retail chain, to examine how store-level employment responses to the 1996 increase in the Federal minimum wage vary with the degree to which this increase was binding on the store. Some stores already paid high wages – in some cases because of high state minimum wages, and in others because they were in areas with high prevailing wages – while others did not.
Interestingly, some stores paid relatively high wages to their adult employees but low wages to their teen employees. At these stores, the minimum wage increase changed the relative cost of teen labor. The data indicate that these stores increased their employment of teen workers, measured both in absolute numbers and as a share of total employment. This result is inconsistent with standard models but the paper discusses alternative models of job search, imperfect information, and monopsony power that can explain the findings. The committee particularly appreciated how the paper was able to sidestep long-running debates about the overall employment effect and examine the separate but related effect of minimum wages on the composition of employment.