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High-Impact Minimum Wages and Heterogeneous Regions

  • Frings, Hanna
  • vom Berge, Philipp
  • Paloyo, Alfredo R.

We estimate the effects on wage and employment growth rates of the introduction and subsequent increases of the minimum wage in the main construction industry of Germany. 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 revealed a contraction in the East of about 2.6 to 3.1 percentage points for a one-standard-deviation increase in the minimum-wage bite, amounting to roughly half of the overall decline in the growth rate, but no significant change was observed for the West.

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Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79828.

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Date of creation: 2013
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Handle: RePEc:zbw:vfsc13:79828
Contact details of provider: Web page: http://www.socialpolitik.org/
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  1. Bachmann, Ronald & Bauer, Thomas K. & Kröger, Hanna, 2012. "Minimum Wages as a Barrier to Entry – Evidence from Germany," Ruhr Economic Papers 329, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
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  3. Arindrajit Dube & T. William Lester & Michael Reich, 2010. "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties," The Review of Economics and Statistics, MIT Press, vol. 92(4), pages 945-964, November.
  4. Ronald Bachmann & Thomas K. Bauer & Hanna Frings, 2014. "Minimum Wages as a Barrier to Entry: Evidence from Germany," LABOUR, CEIS, vol. 28(3), pages 338-357, 09.
  5. J. Barkley Rosser, 2009. "Introduction," Chapters, in: Handbook of Research on Complexity, chapter 1 Edward Elgar.
  6. Allegretto, Sylvia & Dube, Arindrajit & Reich, Michael, 2010. "Do Minimum Wages Really Reduce Teen Employment? Accounting for Heterogeneity and Selectivity in State Panel Data," Institute for Research on Labor and Employment, Working Paper Series qt7jq2q3j8, Institute of Industrial Relations, UC Berkeley.
  7. Paulo Guimarães & Pedro Portugal, 2009. "A Simple Feasible Alternative Procedure to Estimate Models with High-Dimensional Fixed Effects," Working Papers w200909, Banco de Portugal, Economics and Research Department.
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  9. Brown, W., 2009. "The Process of Fixing the British National Minimum Wage, 1997-2007," Cambridge Working Papers in Economics 0904, Faculty of Economics, University of Cambridge.
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  11. Neumark, David & Salas, J.M. Ian & Wascher, William, 2013. "Revisiting the Minimum Wage-Employment Debate: Throwing Out the Baby with the Bathwater?," IZA Discussion Papers 7166, Institute for the Study of Labor (IZA).
  12. Whaples Robert, 2006. "Do Economists Agree on Anything? Yes!," The Economists' Voice, De Gruyter, vol. 3(9), pages 1-6, November.
  13. Paulo Guimarães & Pedro Portugal, 2010. "A simple feasible procedure to fit models with high-dimensional fixed effects," Stata Journal, StataCorp LP, vol. 10(4), pages 628-649, December.
  14. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, June.
  15. Machin, Stephen & Manning, Alan, 1997. "Minimum wages and economic outcomes in Europe," European Economic Review, Elsevier, vol. 41(3-5), pages 733-742, April.
  16. Thiess Buettner & Alexander Ebertz, 2009. "Spatial Implications of Minimum Wages," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 229(2-3), pages 292-312, June.
  17. Bauer, Thomas K. & Kluve, Jochen & Schaffner, Sandra & Schmidt, Christoph M., 2008. "Fiscal Effects of Minimum Wages: An Analysis for Germany," IZA Discussion Papers 3875, Institute for the Study of Labor (IZA).
  18. Charlene Kalenkoski & Donald Lacombe, 2011. "Minimum Wages and Teen Employment: A Spatial Panel Approach," Working Papers Working Paper 2011-08, Regional Research Institute, West Virginia University.
  19. Joseph J. Sabia & Richard V. Burkhauser, 2010. "Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?," Southern Economic Journal, Southern Economic Association, vol. 76(3), pages 592-623, January.
  20. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? – Minimum Wage Effects on German Construction Workers," Ruhr Economic Papers 358, Rheinisch-Westfälisches Institut für Wirtschaftsforschung (RWI), Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
  21. Bachmann, Ronald & König, Marion & Schaffner, Sandra, 2012. "Lost in Transition? Minimum Wage Effects on German Construction Workers," IZA Discussion Papers 6760, Institute for the Study of Labor (IZA).
  22. Marion König & Joachim Möller, 2009. "Impacts of minimum wages: a microdata analysis for the German construction sector," International Journal of Manpower, Emerald Group Publishing, vol. 30(7), pages 716-741, November.
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