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The Minimum Wage, Restaurant Prices, and Labor Market Structure

Aaronson, D; French, E; MacDonald, J; (2008) The Minimum Wage, Restaurant Prices, and Labor Market Structure. Journal of Human Resources , 43 (3) pp. 688-720. 10.3368/jhr.43.3.688.

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Abstract

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.

Type: Article
Title: The Minimum Wage, Restaurant Prices, and Labor Market Structure
DOI: 10.3368/jhr.43.3.688
Publisher version: http://dx.doi.org/10.3368/jhr.43.3.688
Language: English
Additional information: Copyright © 2008 by the Board of Regents of the University of Wisconsin System.
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/1493281
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