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Evaluating the German "Mini-Job" Reform Using a True Natural Experiment

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  • Marco Caliendo
  • Katharina Wrohlich

Abstract

Increasing work incentives for people with low incomes is a common topic in the policy debate across European countries. The "Mini-Job" reform in Germany - introduced on April 1, 2003 - can be seen in line with these policies, exempting labour income below a certain threshold from taxes and employees' social security contributions. We carry out an ex-post evaluation to identify the short-run effects of this reform. Our identification strategy uses an exogenous variation in the interview months in the German Socio-Economic Panel, that allows us to distinguish groups that are (or are not) affected by the reform. To account for seasonal effects we additionally use a difference-in-differences strategy. The results show that the short-run effects of the reform are limited. We find no significant short-run effects for marginal employment. However, there is evidence that single men who are already employed react immediately and increase secondary job holding.

Suggested Citation

  • Marco Caliendo & Katharina Wrohlich, 2006. "Evaluating the German "Mini-Job" Reform Using a True Natural Experiment," Discussion Papers of DIW Berlin 569, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp569
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    Cited by:

    1. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    2. Norbert Berthold & Mustafa Coban, 2014. "Kombilöhne gegen Erwerbsarmut: Warum die USA erfolgreicher sind als Deutschland," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 94(2), pages 118-124, February.
    3. Matthias Collischon & Kamila Cygan-Rehm & Regina T. Riphahn, 2021. "Employment effects of payroll tax subsidies," Small Business Economics, Springer, vol. 57(3), pages 1201-1219, October.
    4. Michael Bräuninger & Jochen Michaelis & Madlen Sode, 2013. "10 Jahre Hartz-Reformen," MAGKS Papers on Economics 201318, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    5. Carrillo-Tudela, Carlos & Launov, Andrey & Robin, Jean-Marc, 2021. "The fall in german unemployment: A flow analysis," European Economic Review, Elsevier, vol. 132(C).
    6. Kyyrä, Tomi & Arranz, José M. & García-Serrano, Carlos, 2019. "Does subsidized part-time employment help unemployed workers to find full-time employment?," Labour Economics, Elsevier, vol. 56(C), pages 68-83.
    7. Caliendo, Marco, 2009. "Income Support Systems, Labor Market Policies and Labor Supply: The German Experience," IZA Discussion Papers 4665, Institute of Labor Economics (IZA).
    8. Alisa Tazhitdinova, 2022. "Increasing Hours Worked: Moonlighting Responses to a Large Tax Reform," American Economic Journal: Economic Policy, American Economic Association, vol. 14(1), pages 473-500, February.
    9. Germana Bottone, 2020. "The Effect of Globalisation on Labour Market Institutions in Europe," Working Papers 0052, ASTRIL - Associazione Studi e Ricerche Interdisciplinari sul Lavoro.
    10. Lietzmann, Torsten & Schmelzer, Paul & Wiemers, Jürgen, 2017. "Marginal employment for welfare recipients: stepping stone or obstacle?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 394-414.
    11. Barron, Kai & Parry, Charles D. H. & Bradshaw, Debbie & Dorrington, Rob & Groenewald, Pam & Laubscher, Ria & Matzopoulos, Richard, 2022. "Alcohol, violence and injury-induced mortality: Evidence from a modern-day prohibition," Discussion Papers, Research Unit: Economics of Change SP II 2022-301, WZB Berlin Social Science Center.
    12. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2012. "Marginal Employment, Unemployment Duration and Job Match Quality," IZA Discussion Papers 6499, Institute of Labor Economics (IZA).
    13. Barron, Kai & Bradshaw, Debbie & Parry, Charles D. H. & Dorrington, Rob & Groenewald, Pam & Laubscher, Ria & Matzopoulos, Richard, 2021. "Alcohol and Short-Run Mortality: Evidence from a Modern-Day Prohibition," Rationality and Competition Discussion Paper Series 273, CRC TRR 190 Rationality and Competition.
    14. Caliendo, Marco & Künn, Steffen & Uhlendorff, Arne, 2016. "Earnings exemptions for unemployed workers: The relationship between marginal employment, unemployment duration and job quality," Labour Economics, Elsevier, vol. 42(C), pages 177-193.
    15. Zoe Adams & Simon Deakin, 2014. "Institutional Solutions to Precariousness & Inequality in Labour Markets," Working Papers wp463, Centre for Business Research, University of Cambridge.
    16. Galassi, Gabriela, 2021. "Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform," IZA Discussion Papers 14248, Institute of Labor Economics (IZA).
    17. Tazhitdinova, Alisa, 2020. "Do only tax incentives matter? Labor supply and demand responses to an unusually large and salient tax break," Journal of Public Economics, Elsevier, vol. 184(C).
    18. Alessandro Sola, 2018. "The 2015 Refugee Crisis in Germany: Concerns about Immigration and Populism," SOEPpapers on Multidisciplinary Panel Data Research 966, DIW Berlin, The German Socio-Economic Panel (SOEP).
    19. Gabriela Galassi, 2021. "Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform," Staff Working Papers 21-15, Bank of Canada.
    20. Jacobo Muñoz-Comet & Stephanie Steinmetz, 2020. "Trapped in Precariousness? Risks and Opportunities of Female Immigrants and Natives Transitioning from Part-Time Jobs in Spain," Work, Employment & Society, British Sociological Association, vol. 34(5), pages 749-768, October.
    21. Oral, Isil & Santos, Indhira & Zhang, Fan, 2012. "Climate change policies and employment in Eastern Europe and Central Asia," Policy Research Working Paper Series 6294, The World Bank.
    22. Müller, Kai-Uwe & Steiner, Viktor, 2011. "Beschäftigungswirkungen von Lohnsubventionen und Mindestlöhnen - Zur Reform des Niedriglohnsektors in Deutschland," Discussion Papers 2011/4, Free University Berlin, School of Business & Economics.

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    More about this item

    Keywords

    Evaluation; natural experiment; difference-in-differences; marginal employment;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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