Employment effects of introducing a minimum wage: The case of Germany

Oliver Holtemöller and Felix Pohle

No 28/2017, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper contributes to the empirical literature on the employment effects of minimum wages. We analysed the introduction of a statutory minimum wage in Germany in 2015 exploiting cross-sectional variation of the minimum wage affectedness. We construct two variables that measure the affectedness for approximately 300 state-industry combinations based on aggregate monthly income data. The estimation strategy consists of two steps. We test for (unidentified) structural breaks in a model with cross-section specific trends to control for state-industry specific developments prior to 2015. In a second step, we test whether the trend deviations are correlated with the minimum wage affectedness. To identify the minimum wage effect on employment, we assume that the minimum wage introduction is exogenous. Our results point towards a negative effect on marginal employment and a positive effect on socially insured employment. Furthermore, we analyse if the increase in socially insured employment is systematically related to the reduction of marginal employment but do not detect evidence.

Keywords: minimum wage; employment effects; minimum wage affectedness; structural break model (search for similar items in EconPapers)
JEL-codes: C21 E24 J38 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-lma and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: Employment effects of introducing a minimum wage: The case of Germany (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:282017

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