Consumption Responses to a Major Minimum Wage Increase Evidence from Spain
González, Ignacio (American University. Department of Economics)
Sala Lorda, Hector (Universitat Autònoma de Barcelona. Departament d'Economia Aplicada)
Trivín, Pedro (Università degli studi di Milano)
Universitat Autònoma de Barcelona. Departament d'Economia Aplicada

Date:	2025
Description:	34 pag.
Abstract:	This paper investigates the effects of minimum wage increases on household consumption, focusing on Spain’s 2019 mà nimum 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.
Grants:	Agencia Estatal de Investigación PID2022-136482OB-I00
Note:	We thank Banc Sabadell for providing data and technical support. We sincerely appreciate the valuable feedback from seminar participants at the University of Oviedo, the 16th Labor Economics Conference of the Spanish Labor Economics Association, and the Workshop on Frontiers of Macro- Labour Economics in Edinburgh. We are grateful to the Instituto de Estudios Fiscales for its financial support.
Rights:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Language:	Anglès
Series:	Document de treball (Universitat Autònoma de Barcelona. Departament d'Economia Aplicada) ; 03.25
Document:	Working paper
Subject:	Minimum Wage ; Consumption ; Transaction Data ; Discretionary Spending ; Nonhomothetic Preferences

Adreça alternativa: https://ideas.repec.org/p/uab/wprdea/wpdea2503.html

34 p, 23.3 MB

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Research literature > Working papers > Department of Applied Economics. Working papers