Wage and Employment Impact of Minimum Wage: Evidence from Lithuania

This paper evaluates the worker-level effects of a historically large and permanent increase in minimum wage Lithuania. Our identification strategy leverages variation workers’ exposure to new wage, exploits fact that there has been no previous years, account for heterogeneous labor market prospects low-wage workers relative high-wage workers. Using detailed administrative records track before after policy change, we show hike significantly increased earnings direct effect was amplified by spillovers reaching median pre-policy income distribution. Overall, find negative on employment However, provide suggestive evidence young workers, highly exposed municipalities, tradable sectors may be more negatively affected. In contrast, concentration or presence envelope wages appear associated with lower job losses. Taken together, our findings imply an elasticity respect −0.021, own-wage −0.033, suggesting gains dominated