Abstract

HERNANDEZ RAMIREZ, Eric; SANCHEZ VARGAS, Armando  and  LOPEZ HERRERA, Francisco. The Heterogeneous Effect of Labor Compensation on Mexican Inflation. Rev. mex. econ. finanz [online]. 2024, vol.19, n.2, e1001.  Epub Oct 15, 2024. ISSN 2448-6795.  https://doi.org/10.21919/remef.v19i2.1001.

In this paper we analyze the heterogeneous impact of an increase in workers' compensation costs on the general and sectoral price level of the Mexican economy. By means of an input-output price model with flexible cost functions, we simulate scenarios considering a 10% increase in workers' remuneration. We find that price increases are heterogeneous at the level of economic sectors and depend both on their cost structure and on how flexible these sectors are to substitute. At the aggregate level, for fixed costs a 10% increase has an effect on inflation of 2.2%, while for flexible costs it has an effect of 1.98%. The originality of this work consists in the finding of heterogeneous impacts, giving rise to the proposal of targeted public policies by sector. Naturally, the model is limited by the assumptions of the product input model.

Keywords : inflation; cost impact; workers remunerations; input-output; sectorial analysis; Mexico.

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