Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/320517 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17923
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper investigates the effects of minimum wage increases on household consumption, focusing on Spain's 2019 minimum 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 credit card payments 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 nonessential 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.
Subjects: 
nonhomothetic preferences
minimum wage
consumption
transaction data
discretionary spending
JEL: 
D12
E21
H31
J31
R20
Document Type: 
Working Paper

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