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ERIC Number: EJ805170
Record Type: Journal
Publication Date: 2008
Pages: 33
Abstractor: As Provided
Reference Count: 47
ISSN: ISSN-0022-166X
The Minimum Wage, Restaurant Prices, and Labor Market Structure
Aaronson, Daniel; French, Eric; MacDonald, James
Journal of Human Resources, v43 n3 p688-720 2008
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. (Contains 3 tables, 3 figures and 42 footnotes.)
University of Wisconsin Press. 1930 Monroe Street, Madison, WI 53711-2059. Tel: 608-263-0668; Fax: 608-263-1173; e-mail:; Web site:
Publication Type: Journal Articles; Reports - Descriptive
Education Level: N/A
Audience: N/A
Language: English
Sponsor: N/A
Authoring Institution: N/A