Lost in Transition? – Minimum Wage Effects on German Construction Workers

33 Pages Posted: 7 Aug 2012

See all articles by Ronald Bachmann

Ronald Bachmann

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Marion Penninger

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Sandra Schaffner

RWI - Leibniz Institute for Economic Research

Date Written: July 2, 2012

Abstract

Using a linked employer-employee data set on the German construction industry, we analyze the effects of the introduction of minimum wages in this sector on labor market dynamics. In doing so, we focus on accessions and separations, as well as the underlying labor market flows, at the establishment level. The fact that minimum wages in Germany are sector-specific enables us to use other industries as control groups within a difference-in-differences framework. We find that both accessions and separations rise in East Germany as a result of the minimum wage introduction. The evidence on detailed worker flows suggests that this is mainly due to increased recalls. Furthermore, the minimum wage introduction lowered job-to-job transitions in East Germany, which can be explained by a more compressed wage distribution making on-the-job search less worthwhile. No clear effects on labor market dynamics in West Germany arise.

Keywords: minimum wage, labour market flows, difference-in-differences, linked

JEL Classification: J23, J38, J42, J63

Suggested Citation

Bachmann, Ronald and Penninger, Marion and Schaffner, Sandra, Lost in Transition? – Minimum Wage Effects on German Construction Workers (July 2, 2012). Ruhr Economic Paper No. 358, Available at SSRN: https://ssrn.com/abstract=2123254 or http://dx.doi.org/10.2139/ssrn.2123254

Ronald Bachmann

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

Marion Penninger

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Sandra Schaffner (Contact Author)

RWI - Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://www.rwi-essen.de/schaffner

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