Working Paper: CEPR ID: DP6892
Authors: Denis Fougre; Erwan Gautier; Herv Le Bihan
Abstract: We examine the effect of the minimum wage on restaurant prices. For that purpose, we estimate a price rigidity model by exploiting a unique dataset of individual price quotes used to calculate the Consumer Price Index in France. We find a positive and significant impact of the minimum wage on prices. We obtain that the effect of the minimum wage on prices is very protracted. The aggregate impact estimated with our model takes more than a year to fully pass through to retail prices.
Keywords: Inflation; Minimum Wage; Price Stickiness; Restaurant Prices
JEL Codes: D43; E31; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Minimum Wage (J38) | Restaurant Prices (P22) |
| Minimum Wage Increase (J38) | Probability of Price Decrease in Fast-Food Restaurants (C69) |
| Minimum Wage (J38) | Marginal Costs in Restaurant Sector (D24) |
| Minimum Wage (J38) | Overall Labor Costs (J39) |
| Minimum Wage Increase (J38) | Price Adjustment Dynamics (E31) |
| Minimum Wage Increase (J38) | Slow Adjustment of Prices (P22) |