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High-Impact Minimum Wages and Heterogeneous Regions

Author

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  • Vom Berge, Philipp

    () (Institute for Employment Research (IAB), Nuremberg)

  • Frings, Hanna

    () (RWI)

Abstract

We estimate the effects of the introduction and subsequent increases of a substantial minimum wage in Germany's main construction industry on wage and employment growth rates. Using a regional dataset constructed from individual employment histories, we exploit the spatial dimension and border discontinuities of the regional data to account for spillovers between districts and unobserved heterogeneity at the local level. The results indicate that the minimum wage increased the wage growth rate for East Germany but did not have a significant impact on the West German equivalent. The estimated effect on the employment growth rate reveals a contraction in the East of about 1.2 percentage points for a one-standard-deviation increase in the minimum-wage bite, amounting to roughly one quarter of the overall decline in the growth rate. We observe no change for the West.

Suggested Citation

  • Vom Berge, Philipp & Frings, Hanna, 2017. "High-Impact Minimum Wages and Heterogeneous Regions," IZA Discussion Papers 10782, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp10782
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    Cited by:

    1. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage: Evidence from establishment-level micro data," Annual Conference 2016 (Augsburg): Demographic Change 145926, Verein für Socialpolitik / German Economic Association.
    2. Micheli, Martin, 2016. "Minimum wage: Redistributive or discriminatory policy?," Annual Conference 2016 (Augsburg): Demographic Change 145830, Verein für Socialpolitik / German Economic Association.
    3. Marco Caliendo & Alexandra Fedorets & Malte Preuss & Carsten Schröder & Linda Wittbrodt, 2017. "The Short-Term Distributional Effects of the German Minimum Wage Reform," SOEPpapers on Multidisciplinary Panel Data Research 948, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Garloff, Alfred, 2016. "Side effects of the new German minimum wage on (un-)employment : first evidence from regional data," IAB Discussion Paper 201631, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Bachmann, Ronald & Penninger, Marion & Schaffner, Sandra, 2015. "The effect of minimum wages on labour market flows: Evidence from Germany," Ruhr Economic Papers 598, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    6. Bernd Fitzenberger & Annabelle Doerr, 2016. "Konzeptionelle Lehren aus der ersten Evaluationsrunde der Branchenmindestlöhne in Deutschland
      [Conceptual lessons from the evaluation studies on sectoral minimum wages in Germany]
      ," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 49(4), pages 329-347, December.
    7. repec:taf:applec:v:49:y:2017:i:51:p:5268-5286 is not listed on IDEAS
    8. Ronald Bachmann & Hanna Frings, 2017. "Monopsonistic competition, low-wage labour markets, and minimum wages – An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 49(51), pages 5268-5286, November.
    9. repec:bla:scotjp:v:64:y:2017:i:4:p:327-348 is not listed on IDEAS
    10. repec:iab:iabfob:201804 is not listed on IDEAS
    11. Bossler, Mario & Gerner, Hans-Dieter, 2016. "Employment effects of the new German minimum wage : evidence from establishment-level micro data," IAB Discussion Paper 201610, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Bossler, Mario, 2016. "Employment expectations and uncertainties ahead of the new German minimum wage," IAB Discussion Paper 201603, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    construction sector; Germany; minimum wage; spatial heterogeneity; spatial panel data;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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