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Use the data in MINWAGE.RAW for this exercise. In particular, use the employment and wage series for sector 232 (Men s and Boy s Furnishings). The variable gwage232 is the monthly growth (change in logs) in the average wage in sector 232, gemp232 is the growth in employment in sector 232, gmwage is the growth in the federal minimum wage, and gcpi is the growth in the (urban) Consumer Price Index.
(ii) Add lags 1 through 12 of gmwage to the equation in part (i). Do you think it is necessary to include these lags to estimate the long-run effect of minimum wage growth on wage growth in sector 232? Explain.
(iii) Run the regression gemp232 on gmwage,gcpi. Does minimum wage growth appear to have a contemporaneous effect on gemp232?
(iv) Add lags 1 through 12 to the employment growth equation. Does growth in the minimum wage have a statistically significant effect on employment growth, either in the short run or long run? Explain. |
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