Minimum Wage and Retail Price Pass-Through: Evidence and Estimates from Consumption Data

49 Pages Posted: 16 May 2017 Last revised: 31 May 2017

See all articles by Sharat Ganapati

Sharat Ganapati

Georgetown University

Jeffrey Weaver

Yale University; Department of Economics

Date Written: May 26, 2017

Abstract

This paper utilizes transaction-level data to examine the effect of the minimum wage on US retail prices. We find minimal price pass-through across a variety of identification strategies. Additionally, there is no evidence of anticipation/retrospective adjustment in prices, heterogeneous responses based on the size of increase, or heterogeneous effects on consumers of different income groups. Labor cost data rationalize these findings. Since labor is a small portion of costs in this sector and the effect of the minimum wage on labor costs is modest, price responses are small. Estimates from other industries suggest that minimal pass-through holds more generally.

Keywords: Minimum Wage, Pass-Through, Price Level

JEL Classification: J31, J38, R32, E31

Suggested Citation

Ganapati, Sharat and Weaver, Jeffrey, Minimum Wage and Retail Price Pass-Through: Evidence and Estimates from Consumption Data (May 26, 2017). Available at SSRN: https://ssrn.com/abstract=2968143 or http://dx.doi.org/10.2139/ssrn.2968143

Sharat Ganapati (Contact Author)

Georgetown University ( email )

Washington, DC 20057
United States

Jeffrey Weaver

Yale University ( email )

New Haven, CT 06520
United States

Department of Economics ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://www.jeff-weaver.com

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