Local minimum wage laws, boundary discontinuity methods, and policy spillovers

Abstract

We use geographically precise longitudinal employment data documenting worker job-to-job mobility to study policy spillovers in the context of three local minimum wage increases. Estimated spillover impacts on wages and hours are statistically significant, geographically diffuse, and sufficient to create concern regarding interpretation of results even using not-immediately-adjacent regions as controls. Spillover effects appear less concerning with smaller interventions or those adopted in smaller jurisdictions. The boundary discontinuity method of causal inference may yield misleading results if a policy’s impacts do not stop at the border of the implementing jurisdiction.