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The effect of doubling the minimum wage on employment and earnings in Mexico

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  • Campos-Vazquez, Raymundo M.
  • Esquivel, Gerardo

Abstract

In January 2019, Mexico doubled the minimum wage in municipalities that share a border with the United States. We use the universe of workers that were formally employed in the Mexican private sector in the third quarter of 2018 (19.6 million) and track their labor history from 2015Q1 through 2021Q1. Using a synthetic control approach, we find no significant effect on employment and a positive and significant impact on earnings, especially at the bottom of the wage distribution.

Suggested Citation

  • Campos-Vazquez, Raymundo M. & Esquivel, Gerardo, 2021. "The effect of doubling the minimum wage on employment and earnings in Mexico," Economics Letters, Elsevier, vol. 209(C).
    • Handle: RePEc:eee:ecolet:v:209:y:2021:i:c:s0165176521004018
    DOI: 10.1016/j.econlet.2021.110124
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    References listed on IDEAS

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    1. Eli Ben-Michael & Avi Feller & Jesse Rothstein, 2021. "The Augmented Synthetic Control Method," Journal of the American Statistical Association, Taylor & Francis Journals, vol. 116(536), pages 1789-1803, October.
    2. Campos-Vazquez Raymundo M. & Delgado Victor & Rodas Alexis, 2020. "The effects of a place-based tax cut and minimum wage increase on labor market outcomes," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 10(1), pages 1-24, March.
    3. Alberto Abadie, 2021. "Using Synthetic Controls: Feasibility, Data Requirements, and Methodological Aspects," Journal of Economic Literature, American Economic Association, vol. 59(2), pages 391-425, June.
    4. Doruk Cengiz & Arindrajit Dube & Attila Lindner & Ben Zipperer, 2019. "The Effect of Minimum Wages on Low-Wage Jobs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 134(3), pages 1405-1454.
    5. Jeffrey Clemens & Lisa B. Kahn & Jonathan Meer, 2021. "Dropouts Need Not Apply? The Minimum Wage and Skill Upgrading," Journal of Labor Economics, University of Chicago Press, vol. 39(S1), pages 107-149.
    6. Ekaterina Jardim & Mark C. Long & Robert Plotnick & Emma van Inwegen & Jacob Vigdor & Hilary Wething, 2018. "Minimum Wage Increases and Individual Employment Trajectories," NBER Working Papers 25182, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. David Card, 2022. "Design-Based Research in Empirical Microeconomics," American Economic Review, American Economic Association, vol. 112(6), pages 1773-1781, June.
    2. Birca Alic, 2024. "Minimum Wage - A Determininant Of Ensuring Sustainable Employment In The Republic Of Moldova," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 4, pages 132-141, August.
    3. Lv, Xueliang & Yu, Yue & Zhao, Xiaomeng & Si, Deng-Kui, 2023. "Minimum wage and household economic vulnerability: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 624-646.
    4. Monroy-Gómez-Franco, Luis A., 2024. "The Economy in its Labyrinth: A Structuralist View of the Mexican Economy in the 21st Century," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 77(2), pages 181-206.
    5. Calderón, Mariana & Cortés, Josué & Pérez Pérez, Jorge & Salcedo, Alejandrina, 2023. "Disentangling the Effects of Large Minimum Wage and VAT Changes on Prices: Evidence from Mexico," Labour Economics, Elsevier, vol. 80(C).
    6. Manuel Fernández & Gabriela Serrano, 2022. "New Perspectives on Inequality in Latin America," Documentos CEDE 20295, Universidad de los Andes, Facultad de Economía, CEDE.

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    More about this item

    Keywords

    Employment; Minimum wage; Mexico;
    All these keywords.

    JEL classification:

    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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