Disentangling the Effects of Large Minimum Wage and VAT Changes on Prices: Evidence from Mexico

Mariana Calderón, Josué Cortés, Jorge Pérez Pérez and Alejandrina Salcedo

Labour Economics, 2023, vol. 80, issue C

Abstract: In January 2019, in an effort to boost activity on the northern Mexican border, the authorities increased the minimum wage by 100 percent and decreased the value-added tax (VAT) by half. Disentangling both effects, we find increments in prices due to the minimum wage hike that were more than offset by the decreases associated with the VAT. In the absence of both policy changes, average prices would have been higher. The share of informal labor in the production of different goods seems to be playing a role in the impact of the minimum wage on prices.

Keywords: Minimum wage; Value-added tax; Prices (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:80:y:2023:i:c:s0927537122001841

DOI: 10.1016/j.labeco.2022.102294

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