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Minimum wages and firm employment: Evidence from a minimum wage reduction in Greece

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  • Georgiadis, Andreas
  • Kaplanis, Ioannis
  • Monastiriotis, Vassilis

Abstract

We investigate firm heterogeneity in responses to minimum wage changes leveraging on a policy reform in 2012 in Greece that introduced a youth sub-minimum through a sharp reduction in the minimum wage that was larger for youth. Using administrative linked employer–employee panel data and a difference-in-differences estimator, we find that, although wages decreased across all firms following the policy reform, adult wages decreased by more, whereas youth wages decreased by less in firms with a higher share of youth in employment. We also find that, in these firms, adult employment increased by more, while youth employment increased by less or even decreased and that these changes reflected mainly new hires rather than job separations. These heterogeneous responses to the change in the minimum wage across firms are not entirely consistent with the competitive model of the labour market.

Suggested Citation

  • Georgiadis, Andreas & Kaplanis, Ioannis & Monastiriotis, Vassilis, 2020. "Minimum wages and firm employment: Evidence from a minimum wage reduction in Greece," Economics Letters, Elsevier, vol. 193(C).
    • Handle: RePEc:eee:ecolet:v:193:y:2020:i:c:s0165176520301750
    DOI: 10.1016/j.econlet.2020.109255
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    References listed on IDEAS

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    1. Alan Manning, 2021. "The Elusive Employment Effect of the Minimum Wage," Journal of Economic Perspectives, American Economic Association, vol. 35(1), pages 3-26, Winter.
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    Cited by:

    1. Georgios Gatopoulos & Alexandros Louka & Ioannis Polycarpou & Nikolaos Vettas, 2021. "Evaluating the Impact of Labour Market Reforms in Greece during 2010-2018," GreeSE – Hellenic Observatory Papers on Greece and Southeast Europe 156, Hellenic Observatory, LSE.
    2. Luz A. Flórez & Didier Hermida & Leonardo Fabio Morales, 2022. "The Heterogeneous Effect of Minimum Wage on Labor Market Flows in Colombia," Borradores de Economia 1213, Banco de la Republica de Colombia.
    3. Monastiriotis, Vassilis & Martelli, Angelo, 2021. "Crisis, adjustment and resilience in the Greek labor market: an unemployment decomposition approach," LSE Research Online Documents on Economics 107048, London School of Economics and Political Science, LSE Library.
    4. Böckerman, Petri & Juuti, Toni & Kosonen, Tuomas & Keränen, Henri, 2024. "Are Firms Willing to Pay Lower Wages? A Quasi-Experiment on Subminimum Wage Policy," IZA Discussion Papers 17453, Institute of Labor Economics (IZA).
    5. Vassilis Monastiriotis & Angelo Martelli, 2021. "Crisis, Adjustment and Resilience in the Greek Labor Market: An Unemployment Decomposition Approach," International Regional Science Review, , vol. 44(1), pages 85-112, January.
    6. Bechlioulis, Alexandros & Chletsos, Michael, 2021. "The differentiated effects of minimum wage reforms on unemployment Evidence from the Greek labor market," MPRA Paper 109327, University Library of Munich, Germany.
    7. Daunfeldt, Sven-Olov & Gidehag, Anton & Seerar Westerberg, Hans, 2023. "Do reduced labor costs increase employment among minimum wage workers? Evidence from a Swedish payroll tax cut," HFI Working Papers 26, Institute of Retail Economics (Handelns Forskningsinstitut).
    8. Roupakias, Stelios, 2022. "Employment and distributional effects of Greece’s national minimum wage," MPRA Paper 114244, University Library of Munich, Germany.

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    More about this item

    Keywords

    Minimum wage; Wages; Firm employment;
    All these keywords.

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

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