Lost in Transition? – Minimum Wage Effects on German Construction Workers

Ronald Bachmann, Marion König and Sandra Schaffner

No 358, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Using a linked employer-employee data set on the German construction industry, we analyse the effects of the introduction of minimum wages in this sector on labour market dynamics. In doing so, we focus on accessions and separations, as well as the underlying labour market flows, at the establishment level. The fact that minimum wages in Germany are sector-specific enables us to use other industries as control groups within a difference-in-differences framework. We find that both accessions and separations rise in East Germany as a result of the minimum wage introduction. The evidence on detailed worker flows suggests that this is mainly due to increased recalls. Furthermore, the minimum wage introduction lowered job-to-job transitions in East Germany, which can be explained by a more compressed wage distribution making on-the-job search less worthwhile. No clear effects on labour market dynamics in West Germany arise.

Keywords: Minimum wage; labour market flows; difference-in-differences; linked employer-employee (search for similar items in EconPapers)
JEL-codes: J23 J38 J42 J63 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Working Paper: Lost in Transition? Minimum Wage Effects on German Construction Workers (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:358

DOI: 10.4419/86788412

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