The Effects of Increasing the Minimum Wage on Prices: Analyzing the Incidence of Policy Design and Context

Using city, state, and federal minimum wage data and city-level price data from the BLS between 1977 and 2014, I explore the effects of minimum wage increases on restaurant prices. I make two contributions to the literature. From a data-driven perspective, I clarify the estimates of pass-through by noting the impact of series interpolation and an implicit but incorrect weighting scheme for the minimum wage changes. I also test whether the pass-through effect changes depending on context: for example, whether the minimum wage was indexed, how the wage increase was timed, or at what level (city, state, or federal) the policy was passed. The paper contributes to the literature by clarifying the estimates and timing of the pass-through effect and it provides evidence in support of policies that can best temper that effect