Minimum Wages and Cost-Push Inflation: Economy-Wide Evidence from Germany

Sevrin Waights, Liliana Cuccu and Maximilian Priem

No 112, Berlin School of Economics Discussion Papers from Berlin School of Economics

Abstract: We provide the first estimates of minimum wage effects on the aggregate price level using data on the near-full German consumer basket across four national reforms, 2015-2024. Drawing on a structural model of pricing under imperfect competition, we utilise minimum wage cost shocks rather than the commonly used firm-level ‘bite’ that we show to be biased under strategic complementarity. Labour cost pass-through is 83-94 percent, at the higher end of estimates for other cost shocks. The implied macro-price elasticity is 0.024. The largest increase in October 2022 to €12 raised the aggregate price level by 0.39 percent.

Keywords: Minimum wages; Consumer prices; Inflation; Cost pass-through; Strategic complementarity (search for similar items in EconPapers)
JEL-codes: E31 J08 J30 J38 L11 (search for similar items in EconPapers)
Pages: 85 pages
Date: 2026-10-02
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Persistent link: https://EconPapers.repec.org/RePEc:bdp:dpaper:0112

DOI: 10.48462/opus4-6467

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