Consumption Responses to a Major Minimum Wage Increase: Evidence from Spain

Ignacio González (), Hector Sala () and Pedro Trivín ()
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Ignacio González: Department of Economics, American University.
Hector Sala: Department of Applied Economics, Universitat Autònoma de Barcelona (UAB) & IZA
Pedro Trivín: DEMM, University of Milan

Working Papers from Department of Applied Economics at Universitat Autonoma of Barcelona

Abstract: This paper investigates the effects of minimum wage increases on household consumption, focusing on Spain’s 2019 mínimum wage increase, which raised the floor on wages by an unprecedented 22.3% in a low-inflation environment. Leveraging high-frequency, confidential transaction data from point-of-sale devices and crèdit card païments at the municipal level, we exploit geographic variation in exposure to the reform to identify its effects. We find that the increase led to a significant rise of 4.5% in household consumption, with the largest gains concentrated in non essential categories such as electronics, leisure, and spending at restaurants and hotels. We corroborate these findings using household-level data from the Spanish Household Budget Survey. Our findings can be rationalized by a simple model featuring nonhomothetic preferences.

Keywords: Minimum Wage; Consumption; Transaction Data; Discretionary Spending; Nonhomothetic Preferences. (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-03
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