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Fiscal Effects of Minimum Wages: An Analysis for Germany

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  • Thomas K. Bauer
  • Jochen Kluve
  • Sandra Schaffner
  • Christoph M. Schmidt

Abstract

. Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low‐ and semi‐skilled full‐time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes.

Suggested Citation

  • Thomas K. Bauer & Jochen Kluve & Sandra Schaffner & Christoph M. Schmidt, 2009. "Fiscal Effects of Minimum Wages: An Analysis for Germany," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 224-242, May.
  • Handle: RePEc:bla:germec:v:10:y:2009:i:2:p:224-242
    DOI: 10.1111/j.1468-0475.2009.00467.x
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    References listed on IDEAS

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    Cited by:

    1. Bredemeier, Christian & Juessen, Falko, 2012. "Minimum Wages and Female Labor Supply in Germany," IZA Discussion Papers 6892, Institute of Labor Economics (IZA).
    2. Mueller, Kai-Uwe & Steiner, Viktor, 2013. "Behavioral effects of a federal minimum wage and income inequality in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79784, Verein für Socialpolitik / German Economic Association.
    3. Philipp vom Berge & Hanna Frings & Alfredo R. Paloyo, 2013. "High-Impact Minimum Wages and Heterogeneous Regions," Ruhr Economic Papers 0408, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    4. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute of Labor Economics (IZA).
    5. repec:zbw:rwirep:0408 is not listed on IDEAS
    6. Thomas K. Bauer & Jochen Kluve & Sandra Schaffner & Christoph M. Schmidt, 2009. "Fiscal Effects of Minimum Wages: An Analysis for Germany," German Economic Review, Verein für Socialpolitik, vol. 10(2), pages 224-242, May.

    More about this item

    JEL classification:

    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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