Card and Krueger

Definition

Card and Krueger refer to a pair of influential economists, Alan B. Krueger and David Card, known for their pioneering work on the effects of minimum wage increases on employment. Their studies utilized the difference-in-differences (DID) method to analyze how changes in minimum wage laws impacted labor markets, contributing significantly to the debate on labor economics and policy implications.

5 Must Know Facts For Your Next Test

1. Card and Krueger's landmark study in 1994 challenged traditional views by showing that increasing the minimum wage did not lead to job losses in New Jersey compared to Pennsylvania.
2. Their use of the DID approach allowed them to control for confounding variables that might influence employment outcomes, strengthening their findings.
3. The methodology introduced by Card and Krueger has been widely adopted in subsequent economic research to analyze policy impacts across various contexts.
4. Their research sparked extensive debate among economists, with some supporting their findings while others criticized the implications for labor market dynamics.
5. Card and Krueger's work has significantly influenced policymakers regarding minimum wage legislation and its perceived effects on employment levels.

Review Questions

• How did Card and Krueger's research challenge the conventional understanding of the relationship between minimum wage increases and employment levels?
  • Card and Krueger's research provided empirical evidence that contradicted the traditional belief that raising the minimum wage would lead to job losses. Their study showed that in New Jersey, where the minimum wage was increased, employment levels remained stable compared to Pennsylvania, which did not raise its minimum wage. This finding suggested that the effects of minimum wage laws are more complex than previously thought and highlighted the importance of using rigorous methodologies like difference-in-differences to analyze such economic policies.
• Discuss how the difference-in-differences methodology used by Card and Krueger enhances the reliability of their findings on minimum wage effects.
  • The difference-in-differences methodology allows researchers to control for time-invariant differences between treatment and control groups by comparing changes over time. In Card and Krueger's case, they used this approach to analyze employment changes before and after a minimum wage increase in New Jersey relative to Pennsylvania. By accounting for other factors that could influence employment trends, this method strengthens the credibility of their conclusions about the lack of negative employment impacts from raising the minimum wage.
• Evaluate the broader implications of Card and Krueger's findings for labor economics and public policy regarding minimum wage legislation.
  • The findings from Card and Krueger have significant implications for labor economics and public policy. Their research has led to a reevaluation of how economists perceive minimum wage laws, suggesting that such increases may not necessarily harm employment as previously believed. This shift in understanding influences policymakers considering minimum wage adjustments, as it highlights that raising wages could benefit low-income workers without devastating job losses. Ultimately, their work has contributed to ongoing discussions about income inequality and economic welfare, promoting more informed legislative decisions.

Related terms

Minimum Wage: The lowest legal wage that employers can pay their workers, often a focal point in debates about labor market policies and economic equality.

Difference-in-Differences (DID): A statistical technique used to estimate causal relationships by comparing the differences in outcomes over time between a treatment group and a control group.

Labor Economics: A field of economics that studies the dynamics of labor markets, including employment, wages, labor policies, and the behavior of employers and employees.