Muchas gracias por la difusión y los comentarios @nachoalvarez.bsky.social!

🔗 Full paper: www.dropbox.com/scl/fi/92ic8...
Feedback more than welcome!

8/8🌍 Policy Takeaway: Big MW increases can raise welfare by expanding consumption choices—not just levels—for low-income households. Spain’s case shows it’s possible without job losses or inflation.

7/8🤔 Why Non-Essentials? We model this using non-homothetic preferences: Low-wage workers, once basic needs are met, prioritize discretionary goods (e.g., leisure, gadgets).

6/8📉 Prices? Unlike some U.S. studies, we see no meaningful pass-through to prices. Real and nominal consumption effects align, suggesting firms absorbed costs or demand shifts were localized.

5/8⚖️ No Employment Trade-off: Despite fears, we find no detectable rise in unemployment post-reform. The consumption boost wasn’t offset by job losses—a win for low-wage workers’ purchasing power.

4/8🏠 Household Data Confirms: Survey results show similar trends—affected households increased spending by 4.6%, with leisure, restaurants, and furniture driving gains. No significant rise in essentials like health/education (likely due to Spain’s strong public services).

3/8💡 Key Result: The MW hike increased aggregate household consumption by 4.5%—but the gains were uneven. Spending surged on non-essentials:

Electronics: +20.2%

Leisure: +11.7%

Restaurants/hotels: +8.7%

2/8 📊 Context: Spain’s 2019 MW reform was unprecedented—raising wages by 22.3% in a low-inflation environment. Did this boost consumption? We analyze high-frequency transaction data (credit cards/POS) + household surveys to find out.

Bottom line: Populists are most dangerous to the rule of law in societies where legal institutions are already fragile. In countries like the U.S., with stronger traditions, institutions can limit the damage—but the impact remains non-negligible. 7/7

While we don’t directly test how populists dismantle institutions, we do not observe that populists are more likely to reform the constitutions, but they are more likely to replace it in contexts with weak rule of law. 6/7

iii) Populists attack the rule of law broadly:

- Judicial independence weakens.
- Access to justice erodes.
- Corruption increases.

5/7

ii) The impact varies based on the strength of the rule of law before populists take office. Populist governments have a stronger effect in contexts with weaker rule of law traditions. 4/7

Empirically, we use Synthetic Control Methods to analyze a cross-country sample including 51 populist events, we find that: i) Populist governments cause a substantial and persistent decline in the rule of law—an 11.4 percentage-point drop after 15 years. 3/7

Core Idea: Populists’ ability to undermine the rule of law depends on a country’s institutional legacies and societal norms. When respect for the law is ingrained as expected behavior, populists face stronger resistance—and institutions hold up better. 2/7