Inspections and Compliance: Enforcement of the Minimum-Wage Law

Mattis Beckmannshagen and Alexandra Fedorets

FinanzArchiv: Public Finance Analysis, 2021, vol. 77, issue 1, 1-58

Abstract: This paper is the first to empirically study the relationship between spatial distributions of labor market inspections and noncompliance with Germany's minimum-wage law. Combining novel administrative data with large-scale longitudinal survey data, we document that the inspection probability is higher in regions with higher noncompliance. This implies risk-based allocation of the inspection efforts and, hence, its endogeneity. Using fixed effects and an instrumental-variable approach, we show that higher inspection efforts have a limited effect on compliance. Based on a theoretical framework and international evidence, we discuss challenges for law enforcement, the political importance of compliance, and possible improvement measures.

Keywords: minimum wage; noncompliance; enforcement (search for similar items in EconPapers)
JEL-codes: J30 K31 K42 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1628/fa-2021-0001

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