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High-Impact Minimum Wages and Heterogeneous Regions

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  • Vom Berge, Philipp

    (Institute for Employment Research (IAB), Nuremberg)

  • Frings, Hanna

    (Federal Ministry of Labor and Social Affairs (BMAS), Germany)

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 of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10782
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    Cited by:

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    2. Braun Helge & Döhrn Roland & Krause Michael & Micheli Martin & Schmidt Torsten, 2020. "Macroeconomic Long-Run Effects of the German Minimum Wage when Labor Markets are Frictional," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(2-3), pages 351-386, April.
    3. Mario Bossler & Hans-Dieter Gerner, 2020. "Employment Effects of the New German Minimum Wage: Evidence from Establishment-Level Microdata," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1070-1094, October.
    4. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa & Wegmann, Jakob, 2018. "Auswirkungen des gesetzlichen Mindestlohns auf Betriebe und Unternehmen," IAB-Forschungsbericht 201804, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    5. Demir, Gökay, 2023. "Labor Market Frictions and Spillover Effects from Publicly Announced Sectoral Minimum Wages," IZA Discussion Papers 16204, Institute of Labor Economics (IZA).
    6. Micheli, Martin, 2016. "Minimum wage: Redistributive or discriminatory policy?," VfS Annual Conference 2016 (Augsburg): Demographic Change 145830, Verein für Socialpolitik / German Economic Association.
    7. 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).
    8. Braun, Helge & Döhrn, Roland & Krause, Michael & Micheli, Martin & Schmidt, Torsten, 2020. "Macroeconomic Long-Run Effects of the German Minimum Wage when Labor Markets are Frictional," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 351-386.
    9. 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].
    10. Bossler, Mario & Gürtzgen, Nicole & Lochner, Benjamin & Betzl, Ute & Feist, Lisa, 2018. "The German minimum wage: Effects on business expectations, profitability, and investments," FAU Discussion Papers in Economics 13/2018, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    11. Redmond, Paul & McGuinness, Seamus, 2022. "Heterogeneous effects of a minimum wage increase on hours worked," Research Series, Economic and Social Research Institute (ESRI), number RS132.
    12. Demir, Gökay, 2022. "Labor market frictions and spillover effects from publicly announced sectoral minimum wages," Ruhr Economic Papers 985, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. 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.
    14. Aleksandra Majchrowska & Pawe³ Strawiñski, 2019. "Minimum wage workers in the private sector in Poland: regional perspective," Lodz Economics Working Papers 2/2019, University of Lodz, Faculty of Economics and Sociology.
    15. 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.
    16. 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.
    17. Popp, Martin, 2024. "Minimum Wages in Concentrated Labor Markets," IZA Discussion Papers 17357, Institute of Labor Economics (IZA).
    18. Caliendo Marco & Wittbrodt Linda & Schröder Carsten, 2019. "The Causal Effects of the Minimum Wage Introduction in Germany – An Overview," German Economic Review, De Gruyter, vol. 20(3), pages 257-292, August.
    19. Mario Bossler, 2017. "Employment expectations and uncertainties ahead of the new German minimum wage," Scottish Journal of Political Economy, Scottish Economic Society, vol. 64(4), pages 327-348, September.
    20. Backhaus, Teresa & Müller, Kai-Uwe, 2019. "Does the German minimum wage benefit low income households?," VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203585, Verein für Socialpolitik / German Economic Association.
    21. Teresa Backhaus & Kai-Uwe Müller, 2019. "Does the German Minimum Wage Help Low Income Households?: Evidence from Observed Outcomes and the Simulation of Potential Effects," Discussion Papers of DIW Berlin 1805, DIW Berlin, German Institute for Economic Research.

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    More about this item

    Keywords

    minimum wage; Germany; construction sector; spatial heterogeneity; spatial panel data;
    All these keywords.

    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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