Card And Krueger Theory

After considering these factors, Card and Krueger decided that the restaurants that they would survey in New Jersey and the seven counties in eastern Pennsylvania would be KFC, Wendy’s, Burger King, and Roy Rogers food chains (Card & Krueger, 1994). According to Card and Krueger, the first set of survey was conducted in February and early March of 1992, by telephone. This designed allowed them to make calls a month before the scheduled increase of the minimum wage in New Jersey. On the survey, there were questions on “employment, starting wages, prices, and other store characteristics.” Of the four hundred and ten restaurants, eighty seven percent responded. However, the response rate was higher in New Jersey with an overall ninety one percent

Before getting to the results of Card and Kruegers study, it is important to know that the prediction from conventional economic theory is that a rise in minimum wage results to competitive employers making employee cuts. Card and Kruegers study on the contrary, find that there is “no evidence that rise in New Jersey’s minimum wage reduced employment at fast food restaurants in the state.” This finding can be considered surprising, as the conventional theory believed a rise in minimum wage would result in a rise in unemployment. Card and Krueger would actually get back together for a second study just two years later. This time Card and Krueger, in 1998, would use data from the Bureau of Labor Statistics (BLS’s) as well as findings from a different study that attempted to refute their 1994 study. Once again though, Card and Krueger found that a “comparison of fast-food employment growth in New Jersey and Pennsylvania over the period of our original study confirms the main findings in our 1994 paper, and calls into question the representativeness of the sample assembled by Berman, Neumark, and Wascher.” (Card & Krueger,

William Lester, and Michael Reich in 2010. Their study, which is titled, “Minimum Wage Effects Across State Borders Estimates Using Contiguous Counties” was published in the Review of Economics and Statistics, in November 2010. Dube, Lester, and Reich’s study is also cited by John Schmitt as one of the most “important and influential papers written on the minimum wage in the last decade.” According to Schmitt, this is because Dube, Lester and Reich offer a “comprehensive reappraisal of both the new minimum wage research and its critics. The study was built around a key methodological innovation which essentially generalized Card and Krueger's New Jersey study to make it nationally representative, and identified a significant weakness in much of the earlier minimum-wage research based on the analysis of state employment patterns, which had failed to control for regional differences in employment growth that were unrelated to the minimum wage.” As aforementioned, one of the biggest critiques against David Card and Alan Krueger’s study over four hundred and ten