DP6892 Restaurant Prices and the Minimum Wage

Author(s): Denis Fougère, Erwan Gautier, Hervé Le Bihan
Publication Date: June 2008
Keyword(s): Inflation, Minimum wage, Price stickiness, Restaurant prices
JEL(s): D43, E31, L11
Programme Areas: International Macroeconomics, Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6892

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.