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Price Pass-Through and the Minimum Wage
Abstract
This paper tests a textbook consequence of competitive markets: that an industry-wide increase in the price of labor is passed on to consumers through an increase in prices. Using several data sources on restaurant prices, I explore the price impact of minimum-wage hikes in Canada and the United States. Particular attention is paid to the timing of these price responses to gauge the "stickiness" of minimum-wage cost shocks. I find that restaurant prices generally rise with changes in the wage bill and that this response is concentrated in the quarter surrounding the month during which the legislation is enacted. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
... Earlier papers that address this question include Aaronson (2001), Card and Krueger (1994), and Katz and Krueger (1992). Aaronson (2001), which is most similar to our paper, uses data from 1978-1995 and finds an elasticity of fast-food prices with respect to the minimum wage ranging from 0.07 to 0.16. ...
... Earlier papers that address this question include Aaronson (2001), Card and Krueger (1994), and Katz and Krueger (1992). Aaronson (2001), which is most similar to our paper, uses data from 1978-1995 and finds an elasticity of fast-food prices with respect to the minimum wage ranging from 0.07 to 0.16. Katz and Krueger's (1992) point estimates are not statistically significant, leading them to conclude that prices are unaffected by the minimum wage, but their standard errors are large and their point estimates do not rule out large effects. ...
... This allows us to estimate flexible difference-in-difference specifications that control for many unobserved factors other studies have had to assume away. This is an advantage in particular over the dataset used by Aaronson (2001), in which identification relies primarily on increases in the federal minimum wage. ...
We study the effect of increases in effective minimum wages on the prices of several fast-food items using quarterly city-level data from 1993–2014, a period during much of which the federal minimum wage declined in real value while state-level legislation flourished. For one product, a burger, we find a robust price elasticity of 9 % with respect to the minimum wage. This estimate indicates substantial cost pass-through when contextualized by the effect of minimum-wage increases on restaurant wage bills. Our estimate for pizza is suggestive of a similarly large pass-through rate but is less precisely estimated, and our estimate for fried chicken is near zero, but estimated even less precisely. Taken as a whole, our estimates point toward sizable cost pass-through of minimum wage increases to consumer prices. These results contribute to a mixed literature on the consumer burden of minimum wage increases.
... Our use of high-frequency scanner data combined with a large number of state changes in the minimum wage also enables us to overcome certain shortcomings in studies of the price effects of minimum wages in the US restaurant industry. These limitations include classical measurement error (Card and Krueger, 1994;Aaronson, 2001); the use of city-level CPI data that are only available in the largest US metro areas (Aaronson, 2001;Aaronson and French, 2007;Aaronson et al., 2008); and the fact that price and wage changes in restaurants may not be well measured due to tipping and quality changes (e.g., size of portions served). These concerns do not apply to retail scanner data, as products in grocery stores are very standardized and retail workers are not tipped. ...
... Our use of high-frequency scanner data combined with a large number of state changes in the minimum wage also enables us to overcome certain shortcomings in studies of the price effects of minimum wages in the US restaurant industry. These limitations include classical measurement error (Card and Krueger, 1994;Aaronson, 2001); the use of city-level CPI data that are only available in the largest US metro areas (Aaronson, 2001;Aaronson and French, 2007;Aaronson et al., 2008); and the fact that price and wage changes in restaurants may not be well measured due to tipping and quality changes (e.g., size of portions served). These concerns do not apply to retail scanner data, as products in grocery stores are very standardized and retail workers are not tipped. ...
... These studies generally examine data on restaurants. Aaronson (2001) and Aaronson et al. (2008) both find complete pass through of costs. However, their data come from a period of much higher inflation, are based on a handful of observations per metro area, and they do not correct their standard errors for clustering. ...
This dissertation studies the redistributive effects of minimum wage policies. The first chapter provides the first causal evidence of how the minimum wage has affected the historical evolution of racial inequality in the United States. It shows that the extension of the federal minimum wage to new sectors of the economy in 1967 can explain more than 20% of the decline in the racial earnings gap observed during the Civil Rights Era -- the only period of time (post World-War II) during which racial inequality fell in the United States. This effect is as large as previously studied policies and economic factors, such as the improvement in schooling for African-Americans or federal anti-discrimination policies. The second chapter estimates the pass-through of minimum wage increases into prices of US grocery stores, using high-frequency scanner level data. A 10% minimum wage hike translates into a 0.2% increase in grocery prices between 2001 and 2012. This magnitude is consistent with a full pass-through of cost increases into consumer prices. Depending on household income, grocery price increases offset between 3 and 12% of the nominal income gains. The third chapter estimates a calibrated labor market model to analyze the likely effects of a $15 federal minimum wage by 2024. It compares employment numbers if the policy were adopted to employment numbers if the policy had not been adopted using a wide range of well-identified elasticities.
... Although empirical research is mixed on how a minimum wage increase affects employment, researchers generally agree on how much producers increase their prices in response to increases in the minimum wage (or how much the Phillips curve moves in response to minimum wage increases). For example, Aaronson (2001) finds that restaurant prices rise with increases in the wage bill that result from minimumwage legislation; this increase is most notable in the quarter when the minimum wage increase comes into effect. Aaronson (2001); Aaronson, French, and MacDonald (2007); and Fougere, Gautier, and Le Bihan (2010) corroborate evidence of pass-through of minimum wages How the Goods Market Adjusts to Minimum Wages In ation ...
... For example, Aaronson (2001) finds that restaurant prices rise with increases in the wage bill that result from minimumwage legislation; this increase is most notable in the quarter when the minimum wage increase comes into effect. Aaronson (2001); Aaronson, French, and MacDonald (2007); and Fougere, Gautier, and Le Bihan (2010) corroborate evidence of pass-through of minimum wages How the Goods Market Adjusts to Minimum Wages In ation ...
... Our baseline estimate that inflation rises 0.24 percentage points cumulatively in response to a 10% increase in the minimum wage is consistent with early work by Wolff and Nadiri (1981), who find that a 10% to 25% increase in the minimum wage raises prices by 0.3 to 0.4 percentage point, a relatively modest effect. Lemos (2004) finds that minimum wage increases in Brazil had similarly small price effects. 2 These results are also related to the (partial-equilibrium) analysis in Aaronson (2001) 3 and Card and Krueger (1994) of relative local restaurant prices in the months following an increase in the minimum wage. ...
... 3. Aaronson (2001) examines the relationship between minimum wage changes and restaurant-price inflation relative to CPI inflation, not the local-aggregate outcomes of minimum wage changes. ...
Using variation in minimum wages across cities and controlling for differences in business‐cycle factors and long‐run local economic trends, we find that following minimum wage increases, both, prices and nominal spending rise modestly. These gains are larger for certain subcategories of goods such as food away from home and in locations where low‐wage workers account for a larger share of employment. Further, minimum wage increases are associated with reduced total debt among households with low credit scores, higher auto debt, and increased access to credit.
... The first is the small but growing literature on the product market effects of minimum wages, which until recently has centered on the restaurant industry (see e.g. Aaronson (2001); Allegretto and Reich (2018) ;Fougere, Gautier, and Bihan (2010); Harasztosi and Lindner (2019)). Most closely related are two papers by Renkin et al. (2022) and Leung (2021), who use high frequency scanner data to study the impact of a large number of state-level minimum wage hikes on consumer prices in the U.S. ...
A growing empirical literature finds that firms pass the cost of minimum wage hikes onto consumers via higher retail prices. Yet, little is known about minimum wage effects on wholesale prices and whether retailers face a wholesale cost shock in addition to the labor cost shock. I exploit the unique market structure of Washington state's legal recreational cannabis industry to investigate minimum wage pass-through to wholesale and retail prices. In a dynamic difference-in-differences framework, I utilize scanner data on $6 billion of transactions across the supply chain and leverage geographic variation in firms' minimum wage exposure across six minimum wage hikes between 2018 and 2021. When ignoring wholesale cost effects, I find retail pass-through elasticities consistent with existing literature -- yet retail pass-through elasticities more than double once wholesale cost effects are accounted for. Retail markups do not adjust to the wholesale cost shock, indicating a full pass-through of the wholesale cost shock to retail prices. The results suggest that previous research may underestimate the impact of minimum wage increases on retail prices. This paper highlights the importance of analyzing the entire supply chain when evaluating the product market effects of minimum wage hikes.
... However, apart from those, the vast majority of quasi-experimental micro-based work that started in the early 1990s in the US and the UK (Card and Krueger (1994) Partly in response to this fairly widespread inability to find evidence of disemployment effects, a second strand of research has investigated other margins through which firms can adjust to the wage cost shock induced by the minimum wage increase. Examples of such margins of adjustment are prices (Aaronson (2001); MaCurdy (2015); Harasztosi and Lindner (2019)), profits (Draca et al. (2011)), firm value (Bell and Machin (2018)) and the quality of services provided (Giupponi and Machin (2018) (2018)). ...
This thesis studies the role of monopsony power, wage floors and atypical work arrangements in modern labour markets. Chapter two studies the extent of monopsony power in a low pay labour market and explores its determinants. I emphasise the role of the spatial distribution of activity and workers’ distaste for commuting in generating imperfect substitutability between jobs, and heterogeneity in monopsony power. Estimates show strong evidence of monopsony power, with wage markdowns of 20-25\%, and a sizeable distaste for commuting amongst workers. Structural estimates of a job search model suggest that commutes are responsible for approximately 1/3 of the wage markdown. Chapter three studies the impact of a Living Wage on wages and intensive margin employment for workers within a large local services firm, with a focus on heterogeneous impacts across age groups. I show the Living Wage raised wages but did not affect aggregate hours, however there is evidence of a reallocation of hours by age arising from differential eligibility to be paid the Living Wage. Chapter four studies the evolving nature of atypical work arrangements, and the interaction with labour wage floors is also explored in the context of the 2016 introduction of the UK’s National Living Wage. Chapter five investigates the extent to which labour supply preferences are responsible for the marked rise in atypical work arrangements in the UK and US. In particular I estimate the distribution for preferences and willingness-to-pay over various job attributes. The list of attributes includes key distinguishing factors of typical and atypical work arrangements, such as security, work-related benefits, flexibility, autonomy and taxation implications. The results are indicative that the majority of the population prefer characteristics associated with traditional employee-employer relationships, and this preference holds even when analysing just the sub-sample of those in atypical work arrangements.
... The effects of minimum wages on employment may also be affected by monopsony power, labor supply responses, output price increases, and other channels of adjustment (Boal and Ransom 1997;Wessels 1997;Bhaskar and To 1999;Dickens et al. 1999;Aaronson 2001;Aaronson et al. 2008;Ahn et al. 2011;Giuliano 2013;Hirsch et al. 2015;Clemens et al. 2018;Phelan 2019;Azar et al. 2019;Munguía 2019;Neumark 2019). If hiring firms have substantial monopsony power, market wages may be well below those that would prevail in competitive labor markets and binding minimum wages may raise wages without reducing employment; equilibrium employment may even increase. ...
This study estimates effects of minimum wages on individual restaurant employment using the 2005–2019 Current Population Survey (CPS) and a two‐way fixed effects regression model. I examine effects for teens and adults with less than an associate's degree for the entire United States and by metropolitan area status. The results indicate that minimum wages on average decrease restaurant employment for teens and increase restaurant employment for these adults, suggesting that minimum wages induce labor‐labor substitution. However, this pattern is driven by metropolitan areas residents. The estimated coefficient for minimum wages on teen restaurant employment in nonmetropolitan areas is not statistically significant.
... This is true, especially, for industries that have a low elasticity of labour demand, like restaurants and retail stores. There is some evidence supporting such price pass-through in restaurants (Aaronson 2001). For example, in the case of Hungary, researchers found out that 75% of the cost of a large increase in their minimum wage was passed on to the consumers (Harasztosi and Lindner 2019). ...
The minimum wage law is becoming one of the most popular tools to address concerns regarding poverty and inequality. There has been a measurable positive impact of minimum wages on societal welfare, which is the reason behind increasing implementation of minimum wage laws. Using existing theoretical and empirical evidence from both sides of the debate, I make an argument that we sti need the minimum wage.
... However, the specification can hardly be exhaustive, nor represent a comprehensive, structural model of the formation of their forecasts. For this reason, I include a lavish number of fixed effects: country and year fixed effects to account for unobserved common factors, and monthly fixed effects to account for seasonality (alike Aaronson 2001). I check whether country fixed effects need to be included with a Hausman (1978) test; the null hypothesis that the difference in coefficients is not systematic is strongly rejected with a higher than 99 percent confidence for most regressions, confirming that fixed effects should be included for a consistent estimation. ...
Fiscal policy has lately resurged as the cornerstone of economic policymaking. At the same time, even advanced economies discovered this tool was not omnipotent and could be dulled by confidence effects. A new concept of fiscal credibility emerged, without being properly defined. This dissertation explores to what extent parallels with monetary credibility can be drawn. It first explores how credibility can in practice explain a variety of outcomes, in the particularly challenging context of the interwar period. Second, it proposes a novel measure of fiscal credibility, identifies possible macroeconomic and institutional determinants, and explores the benefits of established credibility. Third, it conceptualizes the channels through which fiscal credibility might operate.
... Innym wskazywanym w literaturze dostosowaniem jest zintensyfikowana rekrutacja, której celem jest zmiana struktury zatrudnienia osób otrzymujących płacę minimalną polegająca na zwiększeniu zatrudnienia pracowników o relatywnie wysokiej wydajności i zmniejszeniu zatrudnienia pracowników charakteryzujących się niską wydajnością, przy czym mechanizm ten dotyczy przede wszystkim osób młodych o niskich kwalifikacjach (Sabia et al., 2012). W reakcji na wzrost płacy minimalnej przedsiębiorstwa mogą również podnieść ceny oferowanych produktów, ograniczając tym samym spadek realnej krańcowej produktywności i zysku przedsiębiorstwa (Aaronson, 2001;Lemos, 2008), dokonać kompresji płac (zmniejszenia nierówności ich rozkładu) polegającej na obniżeniu bądź spowolnieniu wzrostu wynagrodzeń otrzymywanych przez pracowników o relatywnie wysokich kwalifikacjach (Grossman, 1993) lub obniżyć wypracowywany zysk (Draca et al., 2011). Ponadto, w sytuacji gdy mamy do czynienia z rynkiem pracy monopsonu, ustalenie stawki płacy na poziomie przewyższającym płacę równowagi z rynku konkurencji doskonałej przyczynia się do zmniejszenia rotacji zatrudnienia w przedsiębiorstwie i ograniczenia związanych z nią kosztów (Ashenfelter et al., 2010). ...
Jakie będą makroekonomiczne efekty zapowiedzianego w 2019 r. znaczącego wzrostu płacy minimalnej w Polsce z 2250 zł w 2019 r. do 4000 zł w 2023 r.? Czy silne zwiększenie minimalnego wynagrodzenia spowoduje przyspieszenie wzrostu płac w przetwórstwie przemysłowym i budownictwie? Czy znaczący skumulowany wzrost płacy minimalnej spowoduje pogorszenie konkurencyjności przedsiębiorstw i skłoni je do ograniczenia zatrudnienia? Czy wzrost kosztów pracy na skutek zwiększenia minimalnego wynagrodzenia wywoła wzrost inflacji?
Wyniki modelowania ekonometrycznego i przeprowadzonych symulacji wskazują, że zapowiedziana podwyżka minimalnego wynagrodzenia będzie oddziaływała w kierunku zwiększenia przeciętnego miesięcznego wynagrodzenia w różnych działach gospodarki. Można również oczekiwać znaczącego negatywnego wpływu podwyżki płacy minimalnej na zatrudnienie w sektorze przedsiębiorstw, a także umiarkowanie negatywnego wpływu zwiększenia minimalnego wynagrodzenia na liczbę pracujących poza rolnictwem. Nieznaczny będzie natomiast wpływ podniesienia płacy minimalnej na inflację.
Uzyskane przez autorów wyniki i zaprezentowane wnioski dotyczące oddziaływania silnego skumulowanego wzrostu płacy minimalnej na równowagę makroekonomiczną mogą być pomocne w procesie kształtowania poziomu płacy minimalnej w Polsce w sposób kompleksowy, a więc uwzględniający zarówno siłę nabywczą płac i spójność społeczną, jak i stan rynku pracy i presję inflacyjną.
... This phenomenon suggests a strong short-run price pass-through of labor costs to goods' prices in Argentina, Mexico, Nicaragua, Peru and Uruguay. In fact, Aaronson (2001) has verified that prices might not be so sticky when nominal wages rise. It can be assumed that countries with faster price pass-through of wages can be those with higher inflation. ...
Since the beginning of the 21st century, many Latin American countries have been ruled by governments which were characterized as populist (the so-called new Latin American Left). We focus on the macroeconomic implications of the policies adopted by these governments (instead of their leaders’ rhetoric) and we investigate to what extent this characterization holds. In particular, we focus on their wage policies by doing a Structural Vector Autoregressive analysis and assuming that populist shocks have no long-run effects on real wages. This identification implies that populist leaders prioritize redistribution through nominal wages disregarding the evolution of productivity. Our results indicate that economic populism is not as widespread as previously thought. We argue that our approach leads to more nuanced results: while we find that there is populism in Argentina, the results for Brazil, Bolivia and Ecuador show only sporadic populist events. In the remaining countries, we do not find persistent economic populism.
... Most studies report very limited eff ects of the minimum wage on prices (Lemos, 2008;Wadsworth, 2010). However, there are several exceptions, including studies of fast food sectoral prices (Aaronson, 2001) and restaurant prices (Aaronson and French, 2007;Aaronson et al., 2007). ...
... Frye and Gordon (1981) conducted a timeseries analysis for US quarterly data from 1954 to 1980 and found a very small and positively signed coefficient accounting for the impact of minimum wages on inflation. Aaronson (2001) uses OLS and IV techniques to estimate a model for data on restaurant prices from the US and Canada. The author finds that restaurant prices rise with increases in the labour cost. ...
There are two unconnected strands of the inflation-distribution literature, one that studies the impact of inflation on income distribution and the other the impact of distribution on inflation. This paper is an attempt to fill a gap in this literature, by taking into account the simultaneous determination between inflation and income distribution. We set forth a Post-Keynesian model in which inflation and income distribution are jointly determined in a dynamical system of difference equations. Then, we conducted an empirical investigation of the relationship between inflation and distribution using a Panel Vector Autoregressive (PVAR) model since this econometric technique is robust to reverse causality. Our findings corroborate our theoretical model by showing that increases in the wage share tend to exert a downward pressure in future inflation.
... Results through that time were quite mixed. Aaronson (2001) and MacDonald and Aaronson (2000), for example, found evidence of substantial price pass-through. By contrast, analyses by Katz and Krueger (1992) and by Machin, Manning, and Rahman (2003) found no evidence of price pass-through. ...
This paper discusses non-employment margins through which firms may respond to minimum wage increases. Margins of interest include evasion, output prices, noncash compensation, job attributes including effort requirements, the firm’s mix of low- and high-skilled labor, and the firm’s mix of labor and capital. I discuss the basic theory behind each margin’s potential importance as well as findings from empirical research on their real-world relevance. Additionally, I present a set of pedagogical diagrams that show how supply and demand analyses of labor markets can be extended to bring additional nuances of real-world markets into the classroom.
... 22 My focus is on the employment effects of the minimum wage, but other aspects of the minimum wage have also been studied in the Canadian literature. These analyses include whether minimum wages can reduce poverty ( Campolieti et al. 2012 ;Mascella, Teja, and Thompson 2009 ;Shannon and Beach 1995 ), whether there are passthrough effects of minimum wage increases on prices ( Aaronson 2001 ;, and whether minimum wage increases have effects on the distribution of wages ( Campolieti 2015 ;Fortin and Lemieux 2015 ). As in the studies considering employment, there are some differences in the magnitudes of the estimated effects. ...
I conduct a meta-analysis of the Canadian minimum wage literature, using meta-regression methods to determine whether this literature has a publication bias and the size of the empirical effect after adjusting for this bias. For teenagers, the demographic group with the largest share of minimum wage workers and thus providing the findings of most interest to policy-makers and legislators, I find no evidence of a publication bias and a minimum wage elasticity of about −0.27. I also discuss the implications of my findings for researchers and policy-makers.
... By comparing actual and counterfactual posttreatment wage distributions, we obtain non-parametric evidence on how regulation affects low-wage employment 3 As we discuss in Section 5, if some restaurants anticipated enforcement of minimum wage regulation our results would tend to underestimate the true impacts of the regulation. See for example Aaronson (2001) and Renkin et al. (2017) on this issue. 4 Since we only administered our survey once before minimum wage regulation is enforced, we cannot use our data to document that restaurants in Neuchâtel and in control districts follow the same trend over time. ...
This paper provides a first set of results on the impact of minimum wage regulation in Switzerland. We study the effects of an unexpected Supreme Court ruling mandating the Swiss canton of Neuchâtel to enforce a minimum hourly wage of around CHF 20 previously accepted via popular ballot. Given policy discontinuity at cantonal borders, we design a two-wave survey of restaurants to measure wages, employment, workers’ characteristics, and prices and administer it in Neuchâtel as well as in geographically proximate districts of neighboring cantons. Our data covers pre- and post-enforcement outcomes for around 100 restaurants, with information for more than 800 employees distributed over two-survey waves. Our data suggest that the proportion of workers paid below minimum wage went down from 19 to 5% after the introduction of the policy. This decline is compensated by a significant increase of the workforce paid just above minimum wage, and our results suggest that restaurants did not use employment as a margin of adjustment. We also find evidence that the policy affected the distribution of hourly wages up to CHF 6 above the minimum wage, with some workers initially paid above minimum wage experiencing a wage increase.
... They suggest that materials are the most important non-labor input and 19 they are complementary to labor. The literature on the impact of minimum wages on prices (for example, Aaronson, 2001) typically does find some pass-through at a level consistent with the impact on total costs. Some have inferred from price rises that output and employment must fall (for example, Aaronson and French, 2007), but in the sectors in which minimum wages have the biggest impact, quality of service is obviously variable as well breaking any simple link between prices, output and employment. ...
It is hard to find a negative effect on employment effect of rises in the minimum wage: the elusive employment effect. It is much easier to find an impact on wages. This paper argues the elusive employment effect is unlikely to be solved by better data, methodology or specification. The reason for the elusive employment effect is that there are reason why the link between higher minimum wages and higher labor costs are weaker than one might think and because imperfect competition is pervasive in the labor market.
... While it may seem intuitive that social compliance imposes a cost on firms that increases the probability of closure, existing empirical evidence indicates that the impact on closure may depend on the factory practices subject to audits. In the United States, minimum wage compliance has been associated with price increases (Aaronson 2001;Aaronson and French 2007;Lester 2016;Colla et al. 2017;Allegretto and Reich 2017) and falling stock values (Card and Krueger 1995;Bell and Machin 2016). Similarly, Harrison and Scorse (2010), analyzing Indonesian manufacturing census data, find that the anti-sweatshop campaign of the early 1990s improved compliance with minimum wage law, but compliant firms experienced a fall in profits and the smaller plants among them were more likely to close. ...
A large and growing literature has identified several conditions, including exporting, that contribute to plant survival. A prevailing sentiment suggests that anti‐sweatshop activity against plants in developing countries adds to the risk of closure, making survival more difficult by imposing external constraints that may interfere with optimizing behavior. Using a relatively new plant‐level panel data set from Cambodia, this paper applies survival analysis to estimate the relationship between changes in working conditions and plant closure. The results find little, if any, evidence that improving working conditions increases the probability of closure. In fact, some evidence suggests that improvements in standards relating to compensation are positively correlated with the probability of plant survival.
... In model 3, we did not control hotels' RevPAR, occupancy, or ADR to measure the effects of the minimum wage on GOPPAR. This is because, in reality, the minimum wage increases ADR but the increased ADR decreases the occupancy rate (e.g., Aaronson, 2001;Aaronson et al., 2008;Allegretto & Reich, 2018;Dube, 2019;MaCurdy, 2015). ...
The economic effects of the minimum wage have been the focus of ongoing contradictory debates among policymakers and researchers. This study finds a positive effect of the minimum wage on the operating profitability of hotels in the U.S. However, the pricing practices of full-service hotels are dissimilar to those of limited-service hotels. Although the burden of the minimum wage is substantial, full-service hotels can spread the weight onto other departments, while limited-service hotels mainly rely on rooms revenue. Thus, the effects of the minimum wage on room price (average daily rate; ADR) are more substantial at limited-service hotels than at full-service hotels even though operating profitability (gross operating profit per available room; GOPPAR) is not substantially different between them. Eventually, increased minimum wage can play a beneficial role not only for the hotel industry but also for local society, since minimum wage employees take home a larger salary.
... 6 Partly in response to this fairly widespread inability to find evidence of disemployment effects, a second strand of research has investigated other margins through which firms can adjust to the wage cost shock induced by the minimum wage increase. Examples of such margins of adjustment are prices (Aaronson, 2001;MaCurdy, 2015;Harasztosi and Lindner, 2017), profits (Draca, Machin and Van Reenen, 2011), firm value (Bell and Machin, 2018) and the quality of services provided (Giupponi and Machin, 2018). A third body of the literature has looked at the impact on wage inequality at the bottom of the distribution, and at wage spillover effects up the wage distribution and onto legally unaffected workers (DiNardo, Fortin and Lemieux, 1996;Lee, 1999;Autor, Manning and Smith, 2016;Giupponi and Machin, 2018). ...
The evolving nature of atypical work arrangements is studied. A particular focus is placed on one such form of work relation: zero hour contracts (ZHCs). The paper uses existing secondary data and new survey data collected for the specific purpose of studying alternative work arrangements to describe the nature of ZHC work in the UK labour market. The interaction with labour market policy is explored, in the context of the 2016 introduction of the UK’s National Living Wage. ZHC work is shown to be an important feature of today’s work arrangements, and the wage cost shock induced by the new, higher minimum wage resulted in an increased use of ZHCs in the UK social care sector, and in low wage sectors more generally.
... Such effects can occur in the wage distribution if the legislation causes spillovers to wage levels for which the minimum wage is nonbinding (Aretz et al. 2013;Dittrich et al. 2014;Autor, Manning, and Smith 2016). Spillover effects may also emerge through the product or labor market if minimum wages affect the respective markets' conditions, for example, by changing prices (Aaronson 2001). If employers pass through higher wage costs on product prices, competitors may benefit from a relative advantage allowing them to expand employment. ...
The authors present the first evidence on the consequences of the new statutory minimum wage in Germany, which was implemented on January 1, 2015. Using the IAB Establishment Panel, they identify employment effects from variation in the extent that establishments are affected by the minimum wage. A difference-in-differences estimation reveals an increase in average wages between 3.8% and 6.3% and an employment loss by approximately 1.7% in establishments affected by the minimum wage. These estimates imply a labor demand elasticity with respect to wages ranging between −0.2 and −0.4. The authors also observe a transitory reduction of the working hours in the first year after the introduction and that the employment effect seems mostly driven by a reduction in hires rather than by an increase in layoffs.
... Although the literature on firm responses other than employment cuts has been growing in recent years, it remains thin, especially for developing economies. In high-income country settings, the literature has been looking at the effect of the minimum wage on firm profitability (Draca et al., 2011), stock market value (Bell and Machin, 2018), firm productivity (Rosazza-Bondibene, 2017), firm location (Rohlin, 2011), firm entries and exits (Aaronson et al., 2017), and consumer prices (Aaronson 2001, Aaronson and French 2007, Lemos 2008, Allegretto and Reich 2018. ...
This paper explores the effects of a large increase in the national minimum wage in Turkey on firms’ exit rates from the formal economy. The analysis exploits a unique, linked employer-employee panel data set of the universe of registered firms in all sectors of the economy. The causal impact of the minimum wage hike is estimated by using pre-policy information on the full distribution of wages in registered firms as a measure of exposure to treatment, and by implementing a difference-in-difference estimation strategy. The minimum wage hike is found to increase firms’ exit rates from the formal economy by 12 percent. This suggests that firm exits attributable to the minimum wage hike could account for up to one-third of the total formal employment destruction that occurred between 2015 and 2016. The minimum wage effect on exit rates is found to be larger among firms with low productivity levels before the policy change, and in sectors where profit margins are low. A range of placebo tests and robustness checks indicate that these findings are not driven by trends in unobservable characteristics correlated with exposure to the minimum wage hike.
Inflation and salary increase generally move in the same direction and they are driven by different inputs. Salaries are driven by changes to supply/demand for labor which can be caused by demographic trends, technological advances, labor participation rates and growth in productivity. On the other hand, inflation represents changes in the cost of a market basket of goods (such as groceries and fuel). In the Republic of North Macedonia in the first quarter of 2022 the inflation rate had an upward trend and reached 7.7%. It reflects the price pressures on the supply side caused by global factors, which resulted in an upward trend in the prices of primary products on the international market, and were transmitted to the domestic economy, mainly through increased food prices, oil derivatives and energy and in October reached 13,2%. The analysis is made on the basis of historical data for Real annual rate and inflation rate for the period from 2015 to 2021, in order to answer the question did higher salaries lead to higher inflation. The data analysis was accomplished with testing the hypothesis and correlation between the variables.
Using intertemporal variation in the bounding of a state’s minimum wage by the federal rate and business credit-score data for 15.2 million establishments, we find that the increase in labor costs caused by a higher federal minimum wage leads to lower business credit scores and worsens the financial health of small businesses in the affected states. In particular, small, young, labor-intensive, and minimum-wage-sensitive establishments located in affected states and those located in competitive and low-income areas experience higher financial stress. Increases in the minimum wage are associated with employment reductions and a higher exit rate for small businesses. Our results document some potential costs of a one-size-fits-all nationwide minimum wage for some small businesses.
This paper was accepted by Gustavo Manso, finance.
Funding: This work was supported by the Ewing Marion Kauffman Foundation Junior Faculty Fellowship.
Supplemental Material: The data and internet appendix are available at https://doi.org/10.1287/mnsc.2022.4620 .
Using cross-state and intertemporal variation in whether a state’s minimum wage is bound by the federal minimum wage, we provide evidence that minimum wage increases lead U.S. public firms in minimum-wage-sensitive industries (i.e., retail, restaurant, and entertainment) to cut capital expenditures. These effects are concentrated one to two years after the law goes into effect. Prior to the minimum wage increase, investment trends are similar across minimum-wage-sensitive firms in bound versus unbound states, and we find little evidence that minimum wage changes affect U.S. public firm investment outside of these industries.
This paper was accepted by Victoria Ivashina, finance.
Seattle raised its minimum wage to as much as $11 in 2015 and as much as $13 in 2016. We use Washington State administrative data to conduct two complementary analyses of its impact. Relative to outlying regions of the state identified by the synthetic control method, aggregate employment at wages less than twice the original minimum—measured by total hours worked—declined. A portion of this reduction reflects jobs transitioning to wages above the threshold; the aggregate analysis likely overstates employment effects. Longitudinal analysis of individual Seattle workers matched to counterparts in outlying regions reveals no change in the probability of continued employment but significant reductions in hours, particularly for less experienced workers. Job turnover declined, as did hiring of new workers into low-wage jobs. Analyses suggest aggregate employment elasticities in the range of —0.2 to —2.0, concentrated on the intensive margin in the short run and largest among inexperienced workers. (JEL J22, J23, J24, J31, J38, R23)
Turning a ‘blind eye’ to non‐compliance with minimum wage standards is sometimes presented as a pragmatic way to accommodate higher wages while not harming employment opportunities for workers employed in marginal firms. In this paper, we model firms' wage and employment decisions, and show that there may be a trade‐off between non‐compliance and employment. The main predictions of the model are tested empirically using data from the Italian labour force survey. We find evidence of a positive employment non‐compliance effect, though elasticities are smaller than typically thought as employers internalize the expected costs of non‐compliance. We also show that employment effects are larger at low levels of non‐compliance (when the risk of being referred to court is very low). The implications for policy and the role of regulators in monitoring and sanctioning non‐compliance are discussed.
We examine how and to what extent minimum wage shapes non-listed firms’ earnings information production. To identify the causality, we introduce an improved geographic information system technique to locate firms in areas that straddle the continuities of county borders and then exploit discontinuities of minimum wage at county borders. We find that firms significantly manage earnings information upward as response to increases in minimum wages, particularly for firms with financial constraints. Our findings shed light on the effects of labor policy on the information production of firms and provide policy implications to regulators concerned with the allocation efficiency of capital markets.
This paper examines how the minimum wage affects the characteristics of new establishments. We utilize the introduction of a minimum wage of South Korea in 1988 and exploit a data covering the universe of new plants subject to this law. From difference-in-differences analyses, we first confirm that the introduction of the minimum wage caused new plants to remit higher remuneration to workers. Due to the minimum wage, new plants tended to start with fewer employees and to equip their employees with more capital. Finally, we find that the minimum wage led to higher labor productivity among entering plants.
We examine worker effort as a potential margin of adjustment to a minimum wage hike using unique data on piece rate workers who perform a homogenous task and whose individual output is rigorously recorded. By employing a difference-in-differences strategy that exploits the increase in Florida’s minimum wage from $6.79 to $7.21 on January 1, 2009, and worker location on the pre-2009 productivity distribution, we provide evidence consistent with incumbent workers’ positive effort responses.
A key goal of a higher minimum wage is income redistribution towards low-income families. Existing research on the minimum wage focuses on the impact on affected workers, but is silent on the incomes of the owners of businesses who pay for a higher minimum wage. Higher minimum wages will do more to redistribute income if the owners of businesses who pay the minimum wage are nearer the top of the income distribution, and vice versa. We study evidence on the incidence of the minimum wage on the incomes of business owners using a unique administrative dataset on the universe of tax records for Israel, in the period surrounding a large minimum wage increase. We find that the minimum wage hike reduced profits of companies, with minimum-wage intensive companies bearing the bulk of the cost and adjusting their workforces more aggressively. Notably, profits declined more for lower-income business owners. Moreover, owners of businesses with higher shares of minimum-wage workers ranked at the bottom of the income distribution of business owners. In addition, spouses of business owners earn less than the owners while minimum wage workers have higher earning spouses, further reducing the redistributive effect of the minimum wage.
In accordance with the economic influences of an increase in minimum wage on labor markets, this study examines the effects of the federal-level minimum wage increase on U.S. hotel properties employing a difference-in-differences (DID) estimation method. We compared NYC which witnessed a federal minimum wage increase in 2009 to Washington, D.C which did not receive a wage increase in the same year. Findings showed that the newly enacted federal minimum wage law did not significantly influence U.S. hotel properties’ labor costs. This study, on the other hand, found that the federal minimum wage increase negatively affected hotel properties’ performance, measured by EBITDA and total revenue. This study adds value to the hospitality and tourism literature by rigorously revealing a causal effect of the minimum wage increase on hotel property performance. Further, this study’s findings also provide meaningful guidance for hotel industry practitioners related to navigating minimum wage increases.
I analyze the effect of minimum wage hikes on housing rents using exogenous variation in minimum wages across local labor markets in Japan. I estimate that in low-quality rental housing market, a 10% minimum wage increase induces a 2.5%-4.5% increase in rents. Minimum wage hikes benefit workers in light of a spatial equilibrium model showing that changes in housing market rents work as a sufficient statistic for measuring utility changes arising from changes in minimum wages. The increase in housing rents also implies an unintended benefit for homeowners.
This article studies how minimum-wage policies affect capital investment using the industrial census of manufacturing firms in China, where minimum-wage policies vary across counties. Exploiting discontinuities in minimum-wage policy at county borders, we find that minimum wages increase capital investment. The investment response to minimum wages is stronger for firms that are labor intensive, that have more room for technological improvement, and that cannot sufficiently pass on labor costs to consumers. A natural experiment based on county jurisdictional changes further assures the causal relationship.
This paper estimates the pass-through of minimum wage increases into the prices of US grocery and drug stores. We use high-frequency scanner data and leverage a large number of state-level increases in minimum wages between 2001 and 2012. We find that a 10% minimum wage hike translates into a 0.36% increase in the prices of grocery products. This magnitude is consistent with a full pass-through of cost increases into consumer prices. We show that price adjustments occur mostly in the three months following the passage of minimum wage legislation rather than after implementation, suggesting that pricing of groceries is forward-looking.
This paper examines how minimum wages affect lender and borrower interactions with consumer credit markets. We find that higher state minimum wages increase the supply of unsecured credit, reduce payday loan usage, decrease delinquency, and increase credit scores. Overall, minimum wages reduce borrowing costs and have positive spillover effects on disposable income and liquidity. A back-of-the-envelope of the cost savings indicates that higher minimum wages increase disposable income by 1.3% more than implied by estimates of the direct effect on earnings.
We study the association between the minimum wage and food establishment hygiene violations between Seattle (the treated city) and Bellevue (the control city), both cities located in King County and sharing the same health inspection department. An increase in the real minimum wage of $0.25 is associated with an increase of at least 8% in total and less severe (blue) hygiene violation scores for food establishments in Seattle. We find mixed support for the increase in more severe (red) violations. A decline in employment with an increase in minimum wage could be driving the increases in hygiene violations.
We use Canadian data over the period of 1991Q1 to 2019Q2 to examine the effect of higher minimum wages on consumption, measured as the real retail trade sales per adult population. Such an examination is rare in the extant literature and it is timely given the increasing debate concerning the stimulus versus inflationary effects arising from wage polices because of COVID-19 global pandemic. We apply the autoregressive distributed lag model to determine the causal relationship between these variables. We find one long-run cointegrating relationship that runs from the real minimum wage to the real retail trade sales. In addition, we find that a 1% increase in the minimum wage is associated with almost a 0.5% increase in real retail trade sales in the long run. While our findings rest on several statistical assumptions, there is strong evidence in support of the position that minimum wage strengthens aggregate consumer spending, and thereby the standard of living, economic growth and stability. This is a position that differs from the conclusions drawn from mainstream academic and policy debates on the economic usefulness and efficacy of minimum wage increases.
JEL Codes: C30, E21, E24
The minimum wage is an economic policy tool aimed at raising the earning of low-income households with the ultimate objective to improve the living standard of these group of workers. Nigeria, has over time, enacted four national minimum wage acts. The most recent is the Minimum Wage Repeal and Enactment Act 2019 which has increased the minimum payment to workers from N18, 000 to N30, 000, representing a surge of about 66.67 per cent. Upon implementation of this new bill, it is expected to have varying macroeconomic effects ranging from wage effects, employment effects, distributional effects, welfare effects and price effects among others. This study, therefore examines the macroeconomic effects of the four episodes of the minimum wage increase in Nigeria by calibrating and log-linearising a New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model that is extended to include labour heterogeneity. The study found that minimum wage increase does not improve household welfare and living standard neither does it have any positive growth effect. Furthermore, it strains government finances. The implication of the finding is that minimum wage policy should be complemented with other pro-poor and inclusive development policies in order to improve the quality of life for the poor and vulnerable low income workers.
This study examined the effect of employee compensation on restaurant performance from both short-term and long-term perspectives. The results of this study showed that increasing employee compensation immediately enhances (decreases) restaurant revenue growth (profitability) but decreases (improves) restaurant revenue growth (profitability) after one year. The results suggested that restaurant firms can utilize employee compensation as a management tool to enhance performance in terms of both short-term revenue growth and long-term profitability gains. The results further implied that restaurant firms could consider making small but continuous increases in employee compensation to maintain higher performance outcomes. However, such increases should be implemented with appropriate initiatives to reduce shirking behaviors by overpaid employees.
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%-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%.
The minimum wage has increased in multiple states over the past three decades and it continues to be a controversial policy. Most prior research has examined the effect of the minimum wage on employment and wages. In this study, we examine the impact of the state minimum wage on infant health. Using data on the universe of births in the U.S. over 24 years, we find that an increase in the minimum wage is associated with a small, but statistically significant increase in birthweight driven primarily by increased fetal growth rate. Effects are largest for young, married mothers. In terms of mechanisms, we find no evidence that prenatal care use and smoking during pregnancy are channels through which minimum wage improves infant health.
The purpose of this paper is to examine the effects of increasing the federal minimum wage on productivity in the restaurant industry. Based on the equity theory and fair-wage hypothesis, this study empirically investigated the relationship between the federal minimum wage and restaurant productivity. The results revealed that increasing the federal minimum wage immediately enhances restaurant productivity for up to two years. The results further indicated that both full-service restaurants and low-wage restaurants benefit from the positive effect, while there is no significant effect on limited-service restaurants and high-wage restaurants. The results suggest that restaurants should cope with minimum wage policies by focusing on implementing initiatives that can maximize enhanced work efforts and productivity. More importantly, the results further highlight that restaurants should consider either continuously raising wage levels or raising them every two years to consistently obtain enhanced motivation and productivity.
I have built a monetary DSGE model to investigate how wage underreporting in an economy characterized by a minimum wage regime affects the macroeconomic response to a minimum wage increase. The model is calibrated and estimated for Ukraine. The main result is that under a higher degree of wage underreporting, the economy is less responsive to a minimum wage shock. Quantitatively, the magnitude of the response to a minimum wage shock is affected by the share of non-Ricardian households, that is, households that do not have access to financial markets and consequently consume all of their income each period.
Using a panel of 51 prices from 48 cities in the United States, we provide an upper bound estimate of the rate of convergence
to purchasing power parity. We find convergence rates substantially higher than typically found in cross-country data. We
investigate some potentially serious biases induced by i.i.d. measurement errors in the data, and find our estimates to be
robust to these potential biases. We also present evidence that convergence occurs faster for larger price differences. Finally,
we find that rates of convergence are slower for cities farther apart. However, our estimates suggest that distance alone
can only account for a small portion of the much slower convergence rates across national borders.
Using panel data on state minimum wage laws and economic conditions for the years 1973–89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1–2% in employment among teenagers and a decline of 1.5–2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers.
* Abstract - This paper tests the hypoth- esis that state and local retail sales taxes are fully shifted to consumers. The empirical analysis focuses on city-specific clothing price indices for eight cities during the 1947-77 period and fourteen cities during the 1925-39 period. The results for the postwar period suggest that retail prices rise by approximately the amount of the sales tax, in contrast to other studies that reveal tax overshifting. For the Depression period, clothing prices appear to rise by only two-thirds of the amount of sales taxes. This finding accords with earlier evidence based on retailer surveys in the interwar period.
Many government contracts with or policies towards oligopolistic sectors essentially involve private firms selling a given proportion (ϑ), or quantity, of output to the government at a fixed price (PR) with the remainder being sold on the open-market. Often this is combined with consumer rationing. Examples include cement and sugar in India, and health, housing and defence in many countries. The paper investigates the effects of these schemes (including sales and excise taxation) on prices, output and household welfare under oligopoly and monopolistic competition. Less government control (reduced ϑ) may raise prices and tax shifting can be above or below 100 percent.
Data on the newsstand prices of American magazines is used to investigate the determinants of the frequency of nominal price change. Magazine price changes, often coming after real prices have fallen by one quarter, provide strong evidence for monopolistic sticky price models. The data is examined by applying a fixed effects logit specification to the price change rule implied by a target-threshold model of a firm facing general price inflation, an uncertain future and costly nominal adjustment. The essay concludes that higher inflation leads to more frequent price adjustment and that the real cost of price changes varies with the size of a real price change.
In this paper I explore how changes in the minimum wage affect various occupational wages. I postulate that other wages increase for two reasons: first, firms try to mitigate the deterioration in a worker's relative wage which would cause him to reduce his work effort, and second, there is an increase in the demand for nonminimum wage workers. Wage adjustment patterns are examined to ascertain whether wage comparisons play a role in the adjustment process. The empirical work shows a short-run wage compression among white-collar occupations which is consistent with the wage comparison model. However, large standard errors make inferences weak.
A simple scheme is proposed to measure monopoly pricing behavior. The coefficient of the tax rate term in a price equation identifies the ratio of price to marginal cost. No direct measurement of costs is required, so a major problem for other empirical studies of monopoly is avoided. Empirical results for cross-section time-series data support rejection of atomistic competition but also provide evidence against the operation of an effective cartel in the cigarette industry. The model represents an alternative interpretation of related results in a recent paper by Barzel. Application of the methodology to other markets is feasible.
This paper finds that domestic market concentration in Korea, a small country, systematically affects pass-through of individual industries. The estimates suggest that exchange rates are only partially passed on to import prices in Korea. The evidence implies that imperfect competition is relevant for the exchange rate pass-through, even in a small economy. This finding has important implications for issues such as inflationary effects of depreciation and the effect of trade liberalization. © 2000 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
One of the most fundamental questions in public finance is who bears the burden of taxes -- the incidence of taxation.' Our understanding of incidence from an empirical standpoint is quite meager. Indeed, there seems to be little evidence even in the case that is theoretically the easiest -- partial equilibrium commodity taxes. Are taxes levied on commodities completely shifted into their prices, or does the incidence also fall on firms? How long does the shifting process take? In this paper we employ a unique data source to examine the incidence of sales taxes. The main idea is to take information on the prices of specific commodities in different U.S. cities and to examine the extent to which differences in tax rates and bases are reflected in prices, controlling for other factors (such as costs). We find a surprising variety of shifting patterns. For some commodities, the after-tax price increases by exactly the amount of the tax, a result consistent with the standard competitive model. However, taxes on other commodities are overshifted -- an increase in tax revenue of one dollar per unit increases the price by more than one dollar.
In this paper we analyze taxation using the conjectural variations model of oligopoly. We demonstrate the way in which the incidence of a tax depends upon the pattern of firm interaction. The results obtained have important implications for the controversy surrounding the question of whether a tax oncorporate income can be over-shifted. We also study normative aspects of taxation. The focus here is on the errors that can arise in excess burden calculations when incorrect assumptions on market structure are made.
Using a longitudinal survey of fast-food restaurants in Texas, the authors examine the impact of recent increases in the federal minimum wage on a low-wage labor market. Less than 5% of fast-food restaurants were using the new youth subminimum wage in July/August 1991, even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective. Although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991, those federal minimum wage increases greatly compressed the distribution of starting wages in the Texas fast-food industry. Two findings at variance with conventional predictions are that (1) employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and (2) price changes were unrelated to mandated wage changes. (Abstract courtesy JSTOR.)
Using panel data on state minimum wage laws and economic conditions for the years 1973-89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1-2% in employment among teenagers and a decline of 1.5-2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers. (Abstract courtesy JSTOR.)
This report examines the process of economic and financial integration in East Asia in the light of Europe's experience.� The report provides a comprehensive analysis of East Asian monetary and financial integration process (including a deep analysis of East Asia's response to the 1997-98 financial crisis), a comprehensive critical survey of the literature on monetary and financial integration in East Asia, and an assessment of the various initiatives undertaken in the region for financial cooperation and macroeconomic surveillance.� Its aim is to evaluate the evolution of the last decade and to offer policy suggestions.� The main policy recommendations concern essentially two areas: (i) how to promote the creation of a regional financial market in Asia and (ii) how to encourage cooperation and macroeconomic surveillance in the region. (Provisional version. The printed publication will be delayed until the final text is available).
This report examines the process of economic and financial integration in East Asia in the light of Europe's experience.� The report provides a comprehensive analysis of East Asian monetary and financial integration process (including a deep analysis of East Asia's response to the 1997-98 financial crisis), a comprehensive critical survey of the literature on monetary and financial integration in East Asia, and an assessment of the various initiatives undertaken in the region for financial cooperation and macroeconomic surveillance.� Its aim is to evaluate the evolution of the last decade and to offer policy suggestions.� The main policy recommendations concern essentially two areas: (i) how to promote the creation of a regional financial market in Asia and (ii) how to encourage cooperation and macroeconomic surveillance in the region. (Provisional version. The printed publication will be delayed until the final text is available).
A method of estimating market structure and tax incidence, when data are available for some firms and the total industry, is applied to the domestic Japanese television market. This market is shown to be oligopolistic with a tax incidence on consumers greater than 100 percent. Tax incidence varies with both the tax rate and the market structure, which has implications for dumping cases. The size of the bias in estimating tax incidence from inappropriately assuming that the industry is competitive is theoretically derived, and the bias for color televisions is 19 percent. Copyright 1989 by Blackwell Publishing Ltd.