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Minimum Wage and Real Wage Inequality: Evidence from Pass-Through to Retail Prices

Year: 2020

Type: article

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%.

Source: The Review of Economics and Statistics

DOI: 10.1162/rest_a_00915

Author: Justin H. Leung

Institution: National University of Singapore

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, Decent work and economic growth, No poverty

Open Access status: green

OpenAlex ID: W3121600244

FWCI: 5.524

Cites: 52

Cited by: 62

Related to: 10