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A strategy for development with income redistribution: the minimum wage and growth fronts in Mexico

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  • Bielschowsky, Ricardo
  • del Castillo, Miguel
  • Squeff, Gabriel Coelho
  • Orozco, Roberto
  • Beteta, Hugo E.

Abstract

The purpose of this study is to contribute to the discussion on the viability and potential impact of substantially increasing the pay of the lowest-income workers. To this end, a set of simulations are carried out using the input-output matrix to assess the impact on economic variables of increasing the minimum wage. The analysis yields very favourable indications for the viability of growth with income redistribution in Mexico, based essentially on the domestic mass consumption market. Stimulating growth in demand from the lowest-income households has a favourable impact on GDP and employment and only a relatively small effect on both inflation and imports, which grow by much less than they have with the model that has operated over recent decades.

Suggested Citation

  • Bielschowsky, Ricardo & del Castillo, Miguel & Squeff, Gabriel Coelho & Orozco, Roberto & Beteta, Hugo E., 2022. "A strategy for development with income redistribution: the minimum wage and growth fronts in Mexico," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
    • Handle: RePEc:ecr:col070:48042
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    References listed on IDEAS

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    1. Mariano Bosch & Marco Manacorda, 2010. "Minimum Wages and Earnings Inequality in Urban Mexico," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 128-149, October.
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    4. Sara Lemos, 2004. "The Effects of the Minimum Wage on Prices in Brazil," Labor and Demography 0403011, University Library of Munich, Germany.
    5. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices," IZA Discussion Papers 1072, Institute of Labor Economics (IZA).
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    7. Samaniego, Norma, 2014. "La participación del trabajo en el ingreso nacional: el regreso a un tema olvidado," Estudios y Perspectivas – Sede Subregional de la CEPAL en México 37279, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Sara Lemos, 2004. "The Effect of the Minimum Wage on Prices across Income Levels in Brazil," Discussion Papers in Economics 04/22, Division of Economics, School of Business, University of Leicester.
    9. Campos-Vazquez, Raymundo M. & Esquivel, Gerardo, 2020. "The effect of doubling the minimum wage and decreasing taxes on inflation in Mexico," Economics Letters, Elsevier, vol. 189(C).
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