Interfirm wage differentials in a local labor market: The case of the fast-food industry

We examine interfirm wage differentials among fast-food restaurants in Atlanta, Georgia to determine the degree to which these differentials correspond to the predictions of competitive theory. While no definitive test is possible, given our inability to control all sources of wage variation, the evidence nevertheless suggests that the wage structure is largely shaped by competitive forces, albeit in a relatively complex manner due to differences in a host of factors that the simple version of the theory holds constant. Evidence is also found, on the other hand, that the supply curve of labor to the individual firm slopes upward for experienced workers and that a small noncompensating wage differential may exist that is related to variation in each restaurant's ability to pay.