Working Paper

The consumption response to minimum wage increases


Abstract: This paper presents evidence that spending increases more than income, and thus debt rises, in households with minimum wage workers following a minimum wage hike. Furthermore, we show that the size, timing, persistence, and composition of spending is inconsistent with the basic certainty equivalent life cycle model. However, our findings are consistent with a model where households can borrow against part of the value of their durable goods. ; Preliminary and incomplete.

Keywords: Debt; Minimum wage;

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Bibliographic Information

Provider: Federal Reserve Bank of Chicago

Part of Series: Working Paper Series

Publication Date: 2008

Number: WP-07-23