RT Journal Article
SR Electronic
T1 The Minimum Wage, Restaurant Prices, and Labor Market Structure
JF Journal of Human Resources
JO J Hum Resour
FD University of Wisconsin Press
SP 688
OP 720
DO 10.3368/jhr.43.3.688
VO 43
IS 3
A1 Aaronson, Daniel
A1 French, Eric
A1 MacDonald, James
YR 2008
UL http://jhr.uwpress.org/content/43/3/688.abstract
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.