PT  - JOURNAL ARTICLE
AU  - Aaronson, Daniel
AU  - French, Eric
AU  - MacDonald, James
TI  - The Minimum Wage, Restaurant Prices, and Labor Market Structure
AID  - 10.3368/jhr.43.3.688
DP  - 2008 Jul 01
TA  - Journal of Human Resources
PG  - 688--720
VI  - 43
IP  - 3
4099  - http://jhr.uwpress.org/content/43/3/688.short
4100  - http://jhr.uwpress.org/content/43/3/688.full
SO  - J Hum Resour2008 Jul 01; 43
AB  - 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.