To Analyze the Effect of a Minimum Wage Increase, a Famous

Essay

To analyze the effect of a minimum wage increase, a famous study used a quasiexperiment for two adjacent states: New Jersey and (Eastern) Pennsylvania. A $\widehat { \beta } _ { 1 } ^ { \text {diffs-in-diffs } }$ was calculated by comparing average employment changes per restaurant between to treatment group (New Jersey) and the control group (Pennsylvania). In addition, the authors provide data on the employment changes between "low wage" restaurants and "high wage" restaurants in New Jersey only. A restaurant was classified as "low wage," if the starting wage in the first wave of surveys was at the then prevailing minimum wage of \$4.25. A "high wage" restaurant was a place with a starting wage close to or above the $\$ 5.25$ minimum wage after the increase. (a)Explain why employment changes of the "high wage" and "low wage" restaurants might
constitute a quasi-experiment.Which is the treatment group and which the control group?