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Minimum Wages as a Barrier to Entry – Evidence from Germany

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Author Info

  • Ronald Bachmann

    ()

  • Thomas K. Bauer
  • Hanna Kröger

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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File URL: http://repec.rwi-essen.de/files/REP_12_329.pdf
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Bibliographic Info

Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0329.

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Length: 27 pages
Date of creation: Apr 2012
Date of revision:
Handle: RePEc:rwi:repape:0329

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

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References

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  1. 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.
  2. 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.
  3. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising wage inequality, the decline of collective bargaining, and the gender wage gap," ZEW Discussion Papers 10-014, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. 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.
  5. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027.
  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. 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.
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Citations

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. 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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