Research interests: causal inference, empirical industrial organization, empirical labor economics
Current projects
arXiv preprint arXiv:2303.10367
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.
The Cost Pass-through of Retail Crime
with Johannes Kasinger
Organized retail crime (ORC) has surged to the forefront of public discourse in the United States. Retailers complain that ORC imposes costs in the form of hiring additional security personnel, increased investment in monitoring and enforcement technology, and retail shrink. Yet, little is known about the effect of ORC on market outcomes and the resulting welfare implications. We leverage a novel administrative dataset from the Washington state cannabis industry that matches detailed information on store-level ORC to scanner data from the universe of transactions for cannabis retailers. Exploiting quasi-experimental variation from the timing of store-level robberies and burglaries, we find that crimes cause a 1.8% increase in retail prices at victimized stores, indicating that retailers pass the costs of crime on to consumers. Importantly, we find that nearby competitors increase prices by a similar amount with a two-month lag. We show that competitors’ price response is not driven by i) demand substitution from victimized to competing stores or ii) strategic price competition. Instead, competitors' price response is consistent with delayed knowledge spillovers following crime incidents and own-security expenditures. Our results indicate that the effects of ORC extend beyond individual stores to market prices more generally. Finally, we show that ORC resembles a 2.2% unit tax levied on retailers and we derive the welfare implications of this tax using a sufficient statistics approach.
Draft coming soon