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Restaurant Prices and the Minimum Wage

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  • Fougère, D.
  • Gautier, E.
  • Le Bihan, H.

Abstract

We examine the effect of the minimum wage on restaurant prices. For that purpose, we estimate a price rigidity model by exploiting a unique dataset of individual price quotes used to calculate the Consumer Price Index in France. We find a positive and significant impact of the minimum wage on prices. We obtain that the effect of the minimum wage on prices is very protracted. The aggregate impact estimated with our model takes more than a year to fully pass through to retail prices.

Suggested Citation

  • Fougère, D. & Gautier, E. & Le Bihan, H., 2008. "Restaurant Prices and the Minimum Wage," Working papers 216, Banque de France.
  • Handle: RePEc:bfr:banfra:216
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    1. Minimum wages and the stickiness of restaurant prices
      by Economic Logician in Economic Logic on 2009-04-22 13:02:00

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    1. Dhyne, Emmanuel & Fuss, Catherine & Pesaran, M. Hashem & Sevestre, Patrick, 2011. "Lumpy Price Adjustments: A Microeconometric Analysis," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(4), pages 529-540.
    2. Antje Schubert & Johannes Steinbrecher & Marcel Thum & Michael Weber, 2016. "Auswirkungen des flächendeckenden Mindestlohns auf die gewerbliche Wirtschaft im Freistaat Sachsen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77, October.
    3. Bo E. Honor√ & 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.
    4. Erwan Gautier & Ronan Le Saout, 2015. "The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(6), pages 1063-1089, September.
    5. Yamagishi, Atsushi, 2021. "Minimum wages and housing rents: Theory and evidence," Regional Science and Urban Economics, Elsevier, vol. 87(C).
    6. Nicoletta Berardi & Thomas Eife & Erwan Gautier, 2014. "Optimal price setting during a currency changeover: theory and evidence from french restaurants," Applied Economics, Taylor & Francis Journals, vol. 46(23), pages 2766-2782, August.
    7. Mustafa Utku Özmen, 2020. "In Pursuit Of Understanding Markups In Restaurant Services Prices," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(06), pages 1423-1437, December.
    8. Mirko Draca & Stephen Machin & John Van Reenen, 2011. "Minimum Wages and Firm Profitability," American Economic Journal: Applied Economics, American Economic Association, vol. 3(1), pages 129-151, January.
    9. Sanvi Avouyi-Dovi & Denis Fougère & Erwan Gautier, 2013. "Wage Rigidity, Collective Bargaining, and the Minimum Wage: Evidence from French Agreement Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1337-1351, October.
    10. Youssef Benzarti & Dorian Carloni, 2019. "Who Really Benefits from Consumption Tax Cuts? Evidence from a Large VAT Reform in France," American Economic Journal: Economic Policy, American Economic Association, vol. 11(1), pages 38-63, February.
    11. Arpaia, Alfonso & Cardoso, Pedro & Kiss, Aron & Van Herck, Kristine & Vandeplas, Anneleen, 2017. "Statutory Minimum Wages in the EU: Institutional Settings and Macroeconomic Implications," IZA Policy Papers 124, Institute of Labor Economics (IZA).
    12. Horny, G. & Sevestre, P., 2010. "Wage and price joint dynamics at the firm level: an empirical analysis," Working papers 305, Banque de France.
    13. Sebastian Link, 2019. "The Price and Employment Response of Firms to the Introduction of Minimum Wages," CESifo Working Paper Series 7575, CESifo.
    14. Antje Schubert & Michael Weber, 2016. "Der flächendeckende Mindestlohn in Sachsen: Hohe Reichweite, vielfältige Reaktionen derBetriebe," ifo Dresden berichtet, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 23(03), pages 05-11, June.
    15. repec:ilo:ilowps:462988 is not listed on IDEAS
    16. Daniel MacDonald & Eric Nilsson, 2016. "The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context," Upjohn Working Papers and Journal Articles 16-260, W.E. Upjohn Institute for Employment Research.
    17. David Vincent, 2019. "Estimating (S,s) rule-regression models," London Stata Conference 2019 03, Stata Users Group.

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    More about this item

    Keywords

    Price stickiness ; minimum wage ; inflation; restaurant prices.;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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