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Restaurant Prices and the Minimum Wage

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  • DENIS FOUGERE
  • ERWAN GAUTIER
  • HERVE LE BIHAN

Abstract

In this paper, we examine the effect of the minimum wage on restaurant prices. We contribute both to the study of economic impact of the minimum wage and to the study of microeconomic patterns of price stickiness. For this purpose, we use a unique data set of individual price quotes collected to calculate the Consumer Price Index in France and we estimate a price rigidity model based on a flexible   rule. We find a positive and significant impact of the minimum wage on prices. The effect of the minimum wage on prices is, however, very protracted. A change in the minimum wage takes more than a year to fully pass through to retail prices. Copyright (c) 2010 The Ohio State University.

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Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 42 (2010)
Issue (Month): 7 (October)
Pages: 1199-1234

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Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:7:p:1199-1234

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  1. Minimum wages and the stickiness of restaurant prices
    by Economic Logician in Economic Logic on 2009-04-22 08:02:00
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Cited by:
  1. Mirko Draca & Stephen Machin & John Van Reenen, 2006. "Minimum wages and firm profitability," LSE Research Online Documents on Economics 774, London School of Economics and Political Science, LSE Library.
  2. Gautier, E. & Le Saout, R., 2012. "The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data," Working papers 375, Banque de France.
  3. Dhyne, E. & Fuss, C. & Pesaran, H. & Sevestre, P., 2007. "Lumpy Price Adjustments, A Microeconometric Analysis," Cambridge Working Papers in Economics 0719, Faculty of Economics, University of Cambridge.
  4. Avouyi-Dovi, Sanvi & Fougère, Denis & Gautier, Erwan, 2010. "Wage Rigidity, Collective Bargaining and the Minimum Wage: Evidence from French Agreement Data," CEPR Discussion Papers 7932, C.E.P.R. Discussion Papers.
  5. Bo E. Honoré & Daniel Kaufmann & Sarah Lein, 2012. "Asymmetries in Price‐Setting Behavior: New Microeconometric Evidence from Switzerland," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 211-236, December.
  6. Benassi, Chiara, 2011. "The implementation of minimum wage : challenges and creative solutions," ILO Working Papers 462988, International Labour Organization.
  7. Horny, G. & Sevestre, P., 2010. "Wage and price joint dynamics at the firm level: an empirical analysis," Working papers 305, Banque de France.

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