High-Impact Minimum Wages and Heterogeneous Regions

41 Pages Posted: 11 Apr 2013

See all articles by Philipp vom Berge

Philipp vom Berge

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

Hanna Frings

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

Alfredo R. Paloyo

Rhine-Westphalia Institute for Economic Research (RWI-Essen); Ruhr University of Bochum; University of Wollongong

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2013

Abstract

We estimate the effects on wage and employment growth rates of the introduction and subsequent increases of a substantial 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 reveals 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 is observed for the West.

Keywords: construction sector, Germany, minimum wage, spatial heterogeneity, spatial panel data

JEL Classification: J31, J38

Suggested Citation

vom Berge, Philipp and Frings, Hanna and Paloyo, Alfredo R., High-Impact Minimum Wages and Heterogeneous Regions (March 1, 2013). Available at SSRN: https://ssrn.com/abstract=2246760 or http://dx.doi.org/10.2139/ssrn.2246760

Philipp Vom Berge

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

Regensburger Str. 104
Nuremberg, 90478
Germany

Hanna Frings (Contact Author)

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

Hohenzollernstr. 1-3
Essen, 45128
Germany

HOME PAGE: http://www.rwi-essen.de/hanna-frings

Alfredo R. Paloyo

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

Hohenzollernstr. 1-3
Essen, 45128
Germany

Ruhr University of Bochum ( email )

Bochum, 44780
Germany

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

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