Coverage: Banxico , El CEO , 24 Horas
In January 2019, the minimum wage in the Mexican border with the United States increased by 100 percent. At the same time, the value-added tax (VAT) rate decreased by half. We propose an identification strategy that allows us to separate the effects of the minimum wage and the VAT on prices. We find that the increase in the minimum wage is associated with economically and statistically significant increases in the prices of VAT goods, and with smaller, imprecisely estimated increases for Non-VAT goods, concentrated in food Non-VAT goods. The increments in prices due to the minimum wage were more than offset by decreases associated with the VAT, so in the absence of both policy changes, average prices would have been higher.