State minimum wages and business location: Evidence from a refined border approach

This study examines the effect of state minimum wage changes on new and existing business establishments. It employs a refined border approach in conjunction with other differencing methods to control for unobserved heterogeneous area characteristics. The findings suggest that state minimum wage increases deter new establishments from locating in an area, particularly in industries that rely on low-education workforces, such as the retail and manufacturing industries. However, existing establishments, regardless of industry type, are not found to be adversely affected by minimum wage policy.

Research highlights► This paper studies state minimum wage increases on new and existing establishments. ► It uses a border approach and a differencing mythology. ► Findings show that new establishments are deterred by the minimum wage. ► New business in Retail and Manufacturing are deterred the most. ► Findings show that location decisions of existing establishments are not changed.