Restaurant Prices and the Minimum Wage

Fougère, Denis; Gautier, Erwan; le Bihan, Hervé

Restaurant Prices and the Minimum Wage

55 Pages Posted: 30 Mar 2009

Denis Fougère

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); National Center for Scientific Research (CNRS); IZA Institute of Labor Economics

Erwan Gautier

Banque de France - Centre de Recherche

Hervé le Bihan

Banque de France - Centre de Recherche

There are 3 versions of this paper

Abstract

We examine the effect of the minimum wage on restaurant prices. We contribute to both the study of economic impact of the minimum wage and to the micro patterns of price stickiness. For that purpose, we use a unique dataset of individual price quotes collected to calculate theConsumer Price Index in France and we estimate a price rigidity model based on a flexible (S; s) rule. We find a positive and significant impact of the minimum wage on prices. The effect of the minimum wage on prices is however very protracted. The aggregate impact estimated with our model takes more than a year to fully pass through to retail prices.

Keywords: price stickiness, minimum wage, inflation, restaurant prices

JEL Classification: E31, D43, L11

Suggested Citation: Suggested Citation

Fougere, Denis and Gautier, Erwan and Le Bihan, Herve, Restaurant Prices and the Minimum Wage. IZA Discussion Paper No. 4070, Available at SSRN: https://ssrn.com/abstract=1369816