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Do Minimum Wage Increases Cause Inflation? Evidence from Vietnam

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  • Nguyen, Cuong

Abstract

It is often argued that minimum wage increases can lead to increased inflation. This paper examines the impact of minimum wage increases on inflation in Vietnam during the 1994-2008 period. Inflation is measured by a monthly overall Consumer Price Index (CPI) and a monthly food CPI. It is found that the minimum wage increases did not increase inflation. Since the minimum wage increases often took place one or two months before the Vietnamese New Year festivals, observed increases in monthly inflation after the minimum wage increases were caused by increased consumption demand during the New Year festivals, not by the minimum wage increases.

Suggested Citation

  • Nguyen, Cuong, 2011. "Do Minimum Wage Increases Cause Inflation? Evidence from Vietnam," MPRA Paper 36750, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:36750
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    References listed on IDEAS

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    1. Lemos, Sara, 2004. "The Effect of the Minimum Wage on Prices," IZA Discussion Papers 1072, Institute for the Study of Labor (IZA).
    2. Daniel Aaronson, 2001. "Price Pass-Through And The Minimum Wage," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 158-169, February.
    3. Nguyen Viet, Cuong, 2010. "The Impact of a Minimum Wage Increase on Employment, Wages and Expenditures of Low-Wage Workers in Vietnam," MPRA Paper 36751, University Library of Munich, Germany, revised 15 Aug 2011.
    4. James M. MacDonald & Daniel Aaronson, 2000. "How do retail prices react to minimum wage increases?," Working Paper Series WP-00-20, Federal Reserve Bank of Chicago.
    5. Frye, Jon & Gordon, Robert J, 1981. "Government Intervention in the Inflation Process: The Econometrics of "Self-Inflicted Wounds"," American Economic Review, American Economic Association, vol. 71(2), pages 288-294, May.
    6. repec:fth:prinin:298 is not listed on IDEAS
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    Cited by:

    1. World Bank, 2013. "Minimum Wage Policy : Lessons with a Focus on the ASEAN Region," World Bank Other Operational Studies 16687, The World Bank.
    2. Cuong Viet Nguyen, 2017. "Do minimum wages affect firms’ labor and capital? Evidence from Vietnam," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 22(2), pages 291-308, April.

    More about this item

    Keywords

    Minimum wages; inflation; CPI; Vietnam;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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