We document three new findings about the industry-level response to minimum wage hikes. First, restaurant exit and entry both rise following a hike. Second, the rise in entry and exit is concentrated in chains. Third, there is no change in employment among continuing restaurants. We develop a model of industry dynamics based on putty-clay technology and show that it is consistent with these findings. In the model, continuing restaurants cannot change employment, and thus industry-level adjustment occurs through exit of labor-intensive restaurants and entry of capital-intensive ones. We show these three findings are inconsistent with other models of industry dynamics.
Authors
![Eric French](/sites/default/files/styles/square_desktop/public/2022-07/Eric_French.png?itok=BbO0XrCB)
CPP Co-Director
Eric is the Montague Burton Professor of Industrial Relations and Labour Economics at the University of Cambridge and Professor of Economics at UCL.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Isaac Sorkin
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Daniel Aaronson
Journal article details
- Publisher
- SSRN
- JEL
- E24, J36, L11
- Issue
- Volume 59, Issue DP11097, November 2017
Suggested citation
D, Aaronson and E, French and I, Sorkin. (2017). 'Industry Dynamics and the Minimum Wage: A Putty-Clay Approach' 59(DP11097/2017)
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