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Fiscal Effects of Minimum Wages: An Analysis for Germany

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

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. Copyright 2009 The Authors. Journal Compilation 2009 Verein für Socialpolitik and Blackwell Publishing Ltd. 2009.

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Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 10 (2009)
Issue (Month): (05)
Pages: 224-242

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Handle: RePEc:bla:germec:v:10:y:2009:i::p:224-242
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  1. David Card & Alan B. Krueger, 1993. "Minimum Wages and Employment: A Case Study of the Fast Food Industry in New Jersey and Pennsylvania," NBER Working Papers 4509, National Bureau of Economic Research, Inc.
  2. Bauer, Thomas K. & Kluve, Jochen & Schaffner, Sandra & Schmidt, Christoph M., 2008. "Fiscal Effects of Minimum Wages: An Analysis for Germany," IZA Discussion Papers 3875, Institute for the Study of Labor (IZA).
  3. Fitzenberger, Bernd & Franz, Wolfgang, 2000. "Jobs. Jobs? Jobs! Orientierungshilfen für den Weg zu mehr Beschäftigung," ZEW Discussion Papers 00-49, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Ronald Backmann & Thomas K. Bauer & Jochen Kluve & Sandra Schaffner & Christoph M. Schmidt, 2008. "Mindestlöhne in Deutschland - Beschäftigungswirkungen und fiskalische Effekte," RWI Materialien, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, pages 56, 05.
  5. Kirsten Labuske & Jochen Streb, 2008. "Technological Creativity and Cheap Labour? Explaining the Growing International Competitiveness of German Mechanical Engineering before World War I," German Economic Review, Verein für Socialpolitik, vol. 9, pages 65-86, 02.
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  11. Lietmeyer, Volker & Petzold, Oliver, 2005. "Bedingungen und Ziele für eine Reform der Unternehmensbesteuerung," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 85(9), pages 590-599.
  12. Marcel Thum & Joachim Ragnitz, 2007. "Zur Einführung von Mindestlöhnen: Empirische Relevanz des Niedriglohnsektors," Ifo Schnelldienst, Ifo Institute for Economic Research at the University of Munich, vol. 60(10), pages 33-35, 05.
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