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Using Distribution Regression Difference-in-Differences to Evaluate the Effects of a Minimum Wage Introduction on the Distribution of Hourly Wages and Hours Worked

Author

Listed:
  • Biewen, Martin

    (University of Tuebingen)

  • Fitzenberger, Bernd

    (Institute for Employment Research (IAB), Nuremberg)

  • Rümmele, Marian

    (University of Tübingen)

Abstract

This paper evaluates the effects of the newly introduced German minimum wage on the distribution of hourly wages and hours worked. The study is based on the German Structure of Earnings Survey (GSES), the only large scale data set for Germany that includes information on hourly wages and hours worked. We provide a full distributional analysis based on counterfactual distributions that would have prevailed, had the minimum wage not been introduced. Our results suggest that its introduction almost eliminated wage rates below its threshold and, depending on the specification considered, led to spill-over effects up to 20 percent above it. We show that inequality in hourly wages fell between 2014 and 2018, but that the long-term trend of rising inequality would already have been stopped after 2014 without the minimum wage. We demonstrate that the existence of pre-trends leads to an upward bias for the estimation of the minimum wage effect. We do not find any significant shifts in the distribution of weekly working hours. As a methodological contribution, we provide a transparent treatment of distribution regression difference-in-differences (DR DiD) based on bite measures.

Suggested Citation

  • Biewen, Martin & Fitzenberger, Bernd & Rümmele, Marian, 2022. "Using Distribution Regression Difference-in-Differences to Evaluate the Effects of a Minimum Wage Introduction on the Distribution of Hourly Wages and Hours Worked," IZA Discussion Papers 15534, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp15534
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    References listed on IDEAS

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    2. Holm, Mathilde Lund & Fallesen, Peter & Heinesen, Eskil, 2023. "The effects of parental union dissolution on children’s test scores," SocArXiv p2qgk, Center for Open Science.

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    More about this item

    Keywords

    difference-in-differences; distribution regression; minimum wage; inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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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