Transactional preferences, public policy, and the minimum wage
What is your research about?
The effectiveness of government policies designed to mitigate inequality depends on how firms, workers, and consumers react to those policies. The minimum wage is an example of such a policy, intended to benefit individuals at the bottom of the wage distribution. While much of the research focuses on the consequences of the minimum wage on workers and firms, understanding consumers’ responses have mostly been overlooked. However, if firms pass through the costs associated with the policy by raising prices, the response of consumers is potentially key. Our research provides new insights on how consumer preferences may shape the effectiveness of various policies targeting inequality.
How will the Stone Centre grant help your research?
The Stone Centre grant will help us with a field experiment we have envisioned to document that people have a higher willingness to pay for goods associated with better labor standards in production.
The experiment is a key step in our research as it allows us to elicit willingness to pay following a price increase induced by a minimum wage in an incentivized way in a real-world setting. The core of our idea is to exploit the increase in the Fast Food Restaurant minimum wage from $16 to $20 that will be implemented in California in April 2024. The policy only affects large and well-known fast-food chains with at least 60 locations.
What will you produce as part of your research?
We'll produce a research paper and a research summary of the key findings and policy implications on minimum wages and tax policies.
We aim to extend basic economic courses with insights obtained from our experiment. We aim to enrich the discussion on how to evaluate basic tax policies (sales tax) and market regulation (minimum wages) in the presence of behavioral consumers (who also pay attention to the narratives around the policies).
About this grant
Title of the project: Transactional preferences, public policy, and the minimum wage
Value of the grant: £25,000
Duration: September 2023 – ongoing
