Minimum Wage and Retail Price Pass-Through: Evidence and Estimates from Consumption Data
49 Pages Posted: 16 May 2017 Last revised: 31 May 2017
Date Written: May 26, 2017
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: Suggested Citation