Survival of the Fittest: The Impact of the Minimum Wage on Firm Exit

[Krugminator2]

http://www.hbs.edu/faculty/Publicati...a61e95b679.pdf

Here is a new study from Harvard on the effects minimum wage hikes have on restaurants in areas where minimum wage hikes are supposedly having no effects.

Abstract

We study the impact of the minimum wage on firm exit in the restaurantindustry, exploiting recent changes in the minimum wage at the city level.The evidence suggests that higher minimum wages increase overall exitrates for restaurants. However, lower quality restaurants, which are alreadycloser to the margin of exit, are disproportionately impacted by increases tothe minimum wage. Our point estimates suggest that a one dollar increase in the minimum wage leads to a 14 percent increase in the likelihood of exit for a 3.5-star restaurant (which is the median rating), but has no discernibleimpact for a 5-star restaurant (on a 1 to 5 star scale).

[inthehall]

I skimmed the study. What the hell does exit mean? I first thought it meant leaving the area, but high star restaurants don't just relocate like that. I assume exit means closed.

[AZJoe]