Missing Mass and Minimum Wages: Distributional Effects of Three Minimum Wage Increases in Peru

Download

• Paper (PDF)

Abstract

I study the distributional effects of three minimum wage increases in Peru, from S/750 to S/1,025 between 2016 and 2022, using a pre-post distributional estimator adapted from Cengiz et al. (2019) for a national minimum-wage setting without control jurisdictions. Bunching ratios range from 0.70 to 0.83: for every 100 jobs displaced below the new minimum, 70 to 83 reappear above it, and placebo tests at artificial thresholds produce ratios seven times smaller, confirming the signal is minimum-wage-specific. Extending the excess window to S/500 raises the ratio to 0.94, indicating that workers disperse broadly above the new floor. The self-employment share in the affected wage range rises 15 to 21 percentage points after each event.

Keywords

Minimum Wage, Bunching Estimator, Distributional Effects, Informality, Self-Employment, Peru

Citation

Chávez Padilla, Carlos César. 2026. “Missing Mass and Minimum Wages: Distributional Effects of Three Minimum Wage Increases in Peru.” Working paper.