Price Pass-Through And The Minimum Wage

Daniel Aaronson

The Review of Economics and Statistics, 2001, vol. 83, issue 1, 158-169

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

Date: 2001
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Working Paper: Price pass-through and minimum wages (1997)
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