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Price Pass-Through And The Minimum Wage

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Author Info
Daniel Aaronson
Abstract

This paper tests a textbook consequence of competitive markets: that an industry-wide increase in the price of labor is passed on to consumers through an increase in prices. Using several data sources on restaurant prices, I explore the price impact of minimum-wage hikes in Canada and the United States. Particular attention is paid to the timing of these price responses to gauge the "stickiness" of minimum-wage cost shocks. I find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog

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Publisher Info
Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 83 (2001)
Issue (Month): 1 (February)
Pages: 158-169
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Handle: RePEc:tpr:restat:v:83:y:2001:i:1:p:158-169

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  1. Mark D Brenner, 2004. "The Economic Impact of Living Wage Ordinances," Working Papers wp80, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  2. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices in Brazil," IZA Discussion Papers 1071, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. Mirko Draca & Stephen Machin & John Van Reenen, 2006. "Minimum Wages and Firm Profitability," IZA Discussion Papers 1913, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Daniel Aaronson & Eric French & James MacDonald, 2004. "The minimum wage and restaurant prices," Working Paper Series WP-04-21, Federal Reserve Bank of Chicago. [Downloadable!]
  5. Jeannette Wicks-Lim & Mark D Brenner & Robert Pollin, 2004. "Economic Analysis of the Florida Minimum Wage Proposal," Published Studies ps17, Political Economy Research Institute, University of Massachusetts at Amherst. [Downloadable!]
  6. Daniel Aaronson & Sumit Agarwal & Eric French, 2008. "The consumption response to minimum wage increases," Working Paper Series WP-07-23, Federal Reserve Bank of Chicago. [Downloadable!]
  7. Daniel Aaronson & Eric French, 2003. "Product market evidence on the employment effects of the minimum wage," Working Paper Series WP-03-17, Federal Reserve Bank of Chicago. [Downloadable!]
  8. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices," IZA Discussion Papers 1072, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. James M. MacDonald & Daniel Aaronson, 2000. "How do retail prices react to minimum wage increases?," Working Paper Series WP-00-20, Federal Reserve Bank of Chicago. [Downloadable!]
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