This paper provides a comprehensive assessment of the margins along which firms respond to a large and persistent increase in the minimum wage. We show that the dis-employment effects are small even four years after the reform; that around 80% of the minimum wage increase was paid by consumers and 20% by firm-owners; that firms responded to the minimum wage by substituting labor with capital; and that the minimum wage is more harmful in industries where passing the wage costs to consumers is more difficult. We estimate a model with monopolistic competition to explain these findings.
HARASZTOSI Peter;
LINDNER Attila;
2019-09-03
AMER ECONOMIC ASSOC
JRC110614
0002-8282 (online),
https://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.20171445,
https://publications.jrc.ec.europa.eu/repository/handle/JRC110614,
10.1257/aer.20171445 (online),
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