Evaluating the German Mini-Job Reform Using a True Natural Experiment

23 Pages Posted: 30 Mar 2006

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research

Date Written: March 2006

Abstract

Increasing work incentives for people with low incomes is a common topic in the policy debate across European countries. The "Mini-Job" reform in Germany - introduced on April 1, 2003 - can be seen in line with these policies, exempting labour income below a certain threshold from taxes and employees' social security contributions. We carry out an ex-post evaluation to identify the short-run effects of this reform. Our identification strategy uses an exogenous variation in the interview months in the German Socio-Economic Panel, that allows us to distinguish groups that are (or are not) affected by the reform. To account for seasonal effects we additionally use a difference-in-differences strategy. The results show that the short-run effects of the reform are limited. We find no significant short-run effects for marginal employment. However, there is evidence that single men who are already employed react immediately and increase secondary job holding.

Keywords: evaluation, natural experiment, difference-in-differences, marginal employment

JEL Classification: C25, H31, J68

Suggested Citation

Caliendo, Marco and Wrohlich, Katharina, Evaluating the German Mini-Job Reform Using a True Natural Experiment (March 2006). IZA Discussion Paper No. 2041. Available at SSRN: https://ssrn.com/abstract=894036

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstraße 58
Berlin, 10117
Germany

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