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Minimum Wages as a Barrier to Entry: Evidence from Germany

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  • Bachmann, Ronald

    ()
    (RWI)

  • Bauer, Thomas K.

    ()
    (RWI)

  • Kroeger, Hanna

    ()
    (RWI)

Abstract

This study analyses employers' support for the introduction of industry-specific minimum wages as a cost-raising strategy in order to deter market entry. Using a unique data set consisting of 800 firms in the German service sector, we find some evidence that high-productivity employers support minimum wages. We further show that minimum wage support is higher in industries and regions with low barriers to entry. This is particularly the case in East Germany, where the perceived threat of low-wage competition from Central and Eastern European Countries is relatively high. In addition, firms paying collectively agreed wages are more strongly in favour of minimum wages if union coverage is low and the mark-up of union wage rates is high.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6484.

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Length: 27 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6484

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Keywords: minimum wage; product market competition; service sector;

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References

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  1. Gernot Nerb, 2006. "Mögliche Auswirkungen der geplanten EU-Dienstleistungsrichtlinie auf die Wirtschaft Deutschlands," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 59(05), pages 19-24, 03.
  2. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
  3. Braun, Sebastian, 2011. "Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model," Labour Economics, Elsevier, vol. 18(1), pages 120-129, January.
  4. Shingo Ishiguro & Laixun Zhao, 2009. "Raising Wages To Deter Entry Into Unionized Markets," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 435-445.
  5. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising Wage Inequality, the Decline of Collective Bargaining, and the Gender Wage Gap," IZA Discussion Papers 4911, Institute for the Study of Labor (IZA).
  6. Thomas Kiessl & Carsten Pohl & Heinz Schmalholz, 2006. "Ostdeutsche Unternehmen betrachten EU-Dienstleistungsrichtlinie mit Skepsis," ifo Dresden berichtet, Ifo Institute for Economic Research at the University of Munich, vol. 13(01), pages 15-26, 02.
  7. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. When do employers support minimum wages?
    by Economic Logician in Economic Logic on 2012-06-08 14:35:00
  2. When do employers support minimum wages?
    by noreply@blogger.com (Paul Walker) in Anti-Dismal on 2012-06-09 00:26:00
  3. [??]????????????
    by himaginary in himaginaryの日記 on 2012-06-11 07:00:00
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Cited by:
  1. Frings, Hanna & vom Berge, Philipp & Paloyo, Alfredo R., 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79828, Verein für Socialpolitik / German Economic Association.
  2. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).

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