The Review of Economics and Statistics 2021
Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices
Abstract
This paper considers the impact of the minimum wage on both labor and product markets using detailed store-level scanner data. I provide empirical evidence that a 10% increase in the minimum wage raises grocery store prices by 0.6% to 0.8% and suggest that the minimum wage not only raises labor costs but also affects product demand, especially in poorer regions. This points to novel channels of heterogeneity in pass-through that have distributional consequences, with key implications for real wage inequality. I also find that price rigidity within retail chains ameliorates these effects, reducing the pass-through elasticity for retail prices by about 60%.
- DOI
- 10.1162/rest_a_00915
- Pages
- 1-16
- Language
- en
- Sources
- openalex crossref