The Political economy of the minimum wage

Bruno Jimenez

Labour Economics, 2023, vol. 85, issue C

Abstract: I evaluate the effects of the 2016 minimum wage hike in Peru on the approval of government performance. My identification strategy exploits the regional heterogeneity in the share of workers directly affected by the increase to implement a series of difference-in-differences specifications. For every percentage point increase in the share of treated workers, the approval of the central government (i.e., the president) also increases by a percentage point. I find a partial spillover effect to other levels of government. These results are robust to a number of alternative specifications and falsification tests, and cannot be explained by the results of the 2016 presidential elections. My findings suggest that improvements in subjective living conditions and non-negative effects on observed labor market performance are the main mechanisms behind these causal effects.

Keywords: Minimum wage; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: D72 J31 P16 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:85:y:2023:i:c:s0927537123001380

DOI: 10.1016/j.labeco.2023.102463

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