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Short-Term macroeconomic evaluation of the German minimum wage with a VAR/VECM

Alexander Herzog-Stein () and Camille Logeay

No 197-2019, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: The German minimum wage was introduced in January 2015. This paper investigates the short-term macroeconomic impacts of its introduction. Therefore, an estimated VAR/VECM is used to perform forecasts that are interpreted as counterfactual to the introduction of the minimum wage and compared to actual developments of six key macroeconomic variables. The deviations are interpreted as minimum wage effects. Robustness checks as well as a comparison with descriptive empirical results are performed to assess the validity of the results. Overall, small positive price effects, significant positive wage effects, and positive employment effects although not robustly estimated in their magnitude are found.

Keywords: Minimum Wage; VAR; VECM; Wage; Price; Employment; Macroeconomics; Germany (search for similar items in EconPapers)
JEL-codes: E01 E17 E24 E65 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019
New Economics Papers: this item is included in nep-mac
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