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Minimum wages and competition: The case of the German roofing sector

  • Kraft, Kornelius
  • Rammer,Christian
  • Gottschalk, Sandra

This paper analyses the effects of minimum wages on competition in the German roofing sector. The case is particularly interesting since this sector is faced with a uniform minimum wage despite significant regional disparities in productivity and wages. As a control industry we take the plumbing sector, which shows a similar market structure and demand trend but is not subject to a minimum wage. Employing a comprehensive firm panel data and using a difference-in-difference approach, we estimate the impacts of minimum wages on market entries and exits and firms' profitability. We find significant effects for East Germany which point to a substantial shift in industry structure. Minimum wages decreased both market entries and exits for roofing firms while they increased entries of sole traders. A decreasing number of non-sole traders lowered competition for this group of firms and helped them to increase profitability. The increasing share of sole traders may indicate some type of evasion strategy in eastern Germany, particularly since wages for skilled roofers declined towards the minimum wage. In the western part of the country minimum wages had no impact on competition.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 12-083.

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Date of creation: 2012
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Handle: RePEc:zbw:zewdip:12083
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  1. Guimaraes, Paulo & Mata, José & Portugal, Pedro, 1995. "The Survival of New Plants: Start-up Conditions and Post-entry Evolution," CEPR Discussion Papers 1203, C.E.P.R. Discussion Papers.
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  4. Daniel Aaronson & Eric French, 2003. "Product market evidence on the employment effects of the minimum wage," Working Paper Series WP-03-17, Federal Reserve Bank of Chicago.
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  12. Aretz, Bodo & Arntz, Melanie & Gregory, Terry, 2012. "The minimum wage affects them all: Evidence on employment spillovers in the roofing sector," ZEW Discussion Papers 12-061, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  19. repec:cup:cbooks:9780521816632 is not listed on IDEAS
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