Title: The effects of minimum wages on immigrants' employment: Evidence from the Swedish economy
Authors: Christopher Baum - Boston College (United States) [presenting]
Hans Loof - Royal Institute of Technology (Sweden)
Pardis Nabavi - Royal Institute of Technology (Sweden)
Andreas Stephan - Jonkoping University (Sweden)
Abstract: Neoclassical economic theory predicts that higher minimum wages lead to lower employment. From a theoretical standpoint, the impact of minimum wages is likely to be larger among the foreign-born than among natives: If immigrants are less productive than natives within the low-skilled group, then standard economic theories predict that immigrants should experience more adverse employment effects than natives when minimum wages increase. The effects of minimum wages on immigrants' employment in Sweden will be evaluated. Sweden does not have statutory minimum wage laws. Instead, minimum wages are determined separately in each industry in the contracts between the unions and the employer organizations. These contracts are extended to all workers in each sector and are therefore also binding for non-union workers. In addition to varying across sectors, these minimum provisions vary across regions and seniority. We apply a structural estimation approach to the estimation of the relationship between minimum wages and employment using Swedish data that focuses on the potentially crucial heterogeneity across sectors as well as across regions. Our estimation approach is based on a generalized structural equation model (GSEM). Stata's GSEM extends that framework to incorporate multiple equation systems and latent variables.