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Price Pass-Through And The Minimum Wage

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  • 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 Technology

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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/003465301750160126
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Bibliographic 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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