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Inspections and Compliance: Enforcement of the Minimum-Wage Law

Author

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  • Mattis Beckmannshagen
  • Alexandra Fedorets

Abstract

This paper is the first to empirically study the relationship between spatial distributions of labor market inspections and noncompliance with Germany's minimum-wage law. Combining novel administrative data with large-scale longitudinal survey data, we document that the inspection probability is higher in regions with higher noncompliance. This implies risk-based allocation of the inspection efforts and, hence, its endogeneity. Using fixed effects and an instrumental-variable approach, we show that higher inspection efforts have a limited effect on compliance. Based on a theoretical framework and international evidence, we discuss challenges for law enforcement, the political importance of compliance, and possible improvement measures.

Suggested Citation

  • Mattis Beckmannshagen & Alexandra Fedorets, 2021. "Inspections and Compliance: Enforcement of the Minimum-Wage Law," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 77(1), pages 1-58.
    • Handle: RePEc:mhr:finarc:urn:doi:10.1628/fa-2021-0001
    DOI: 10.1628/fa-2021-0001
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    Cited by:

    1. Alexandra Fedorets, 2021. "12 Euro Mindestlohn: neue Erwartungen und alte Hürden," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 101(12), pages 929-932, December.

    More about this item

    Keywords

    minimum wage; noncompliance; enforcement;
    All these keywords.

    JEL classification:

    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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