The Minimum Wage, Restaurant Prices, and Labor Market Structure
Using store-level and aggregated Consumer Price Index data, we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation. We introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments. Furthermore, the model implies employment and prices are always negatively related. Therefore, our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes. Our estimated price responses challenge other explanations of the small employment response, too.
Year of publication: |
2008
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Authors: | Aaronson, Daniel ; French, Eric ; MacDonald, James |
Published in: |
Journal of Human Resources. - University of Wisconsin Press. - Vol. 43.2008, 3
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Publisher: |
University of Wisconsin Press |
Saved in:
Online Resource
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