Wage increases and inflation in Bolivia: causality evidence (2000–2025)

Abstract

This article investigates the causal relationship between increases in the National Minimum Wage (NMW) and the Consumer Price Index (CPI) in Bolivia during the period 2000–2025. The central objective is to determine whether wage adjustments act as causal factors of inflation or as mechanisms for restoring purchasing power. Within a framework that contrasts neoclassical cost theory with Latin American structuralism, the methodology employs a quantitative approach through the estimation of a Vector Autoregressive (VAR) model and Granger causality tests on a series of 312 monthly observations.The results demonstrate that there is no statistical evidence to support the claim that wages cause inflation in the Granger sense (p = 0.370), identifying persistent inflation associated with the lagged behavior of the CPI. The discussion suggests that, particularly during the 2024-2025 period, price dynamics were more closely linked to external constraints, foreign exchange shortages, and supply shocks than to wage pressures, showing limited evidence in favor of a wage-price spiral. It is concluded that inflationary dynamics in Bolivia respond primarily to monetary and structural factors rather than to the behavior of the minimum wage. In this sense, the findings provide relevant empirical evidence for the debate on wage policy and inflation in economies with external constraints and high levels of informal employment.