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
![Eric French](/sites/default/files/styles/square_desktop/public/2022-07/Eric_French.png?itok=BbO0XrCB)
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.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Daniel Aaronson
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
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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