Beyond Labor Market Outcomes: The Impact of the Minimum Wage on Nondurable Consumption

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How effective is the minimum wage at raising nondurable household consumption through the redistribution of income towards poor workers? Using novel data on retail sales by county, I exploit variation in the minimum wage rates across states and over time to answer this question. I find that a 10% increase in the minimum wage increases sales by 1.1%. I argue that such a large effect is explained by positive spillovers benefiting the bottom quarter of the labor income distribution. As expected, the expenditure response to minimum wage hikes is stronger in counties where the policy is more binding.

Last updated on 06/30/2016