In 1992, New Jersey Raised Its Minimum Wage, but Pennsylvania

question 42

Essay

In 1992, New Jersey raised its minimum wage, but Pennsylvania, a neighboring state, did not. What type of experiment did this change set up?

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Definitions:

Call Options

Call options are financial contracts that give the option buyer the right, but not the obligation, to buy a specified quantity of an asset at a predetermined price within a set time frame.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, typically represented by the yield on government securities such as Treasury bills.

Striking Price

The predetermined price at which the holder of an option contract can buy (call) or sell (put) the underlying asset.

Callable Bonds

Callable bonds are bonds that can be redeemed by the issuer prior to their maturity date at a specified call price.