Restaurant Prices and the Minimum Wage

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Just received notice about an interesting Chicago Fed working paper, and thought I'd pass it along."The Minimum Wage and Restaurant Prices" by Daniel Aaronson, Eric French, and James MacDonald has the following abstract:

Using both store-level and aggregated price data from the food away from home component of the Consumer Price Index survey, we show that restaurant prices rise in response to an increase in the minimum wage. These results hold up when using several different sources of variation in the data. We interpret these findings within a model of employment determination. The model implies that minimum wage hikes cause employment to fall and prices to rise if labor markets are competitive but potentially cause employment to rise and prices to fall if labor markets are monopsonistic. Therefore, our empirical results appear to provide evidence against the hypothesis that monopsony power is important for understanding the small observed employment responses to minimum wage changes.
I'll reserve judgment until I can read the whole thing.

1 Comment

Thanks for the tip. Should be an interesting read.

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This page contains a single entry by Kevin published on November 30, 2004 11:17 AM.

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