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Long-Term Employment Effects of the Minimum Wage in Germany: New Data and Estimators

Author

Listed:
  • Marco Caliendo

    (University of Potsdam, CEPA, BSoE, IZA, DIW, IAB)

  • Nico Pestel

    (Maastricht University, IZA, CESifo)

  • Rebecca Olthaus

    (DIW, BSoE, CEPA, University of Potsdam)

Abstract

We investigate the long-term effects of the introduction of the German minimum wage in 2015 and its subsequent increases on regional employment. Using comprehensive survey data, we are able to measure the regional bite of the minimum wage in 2014, just before its introduction, as well as in 2018, before it was raised substantially in several steps. The introduction mainly affected the labour market in East Germany, while the minimum wage increases increasingly affected low-wage regions in West Germany, with about one third of regions changing their (binary) treatment status between 2014 and 2018. We use different specifications and extensions of the canonical difference-in-differences approach, as well as a set of new estimators that allow unbiased effect estimation with a staggered treatment adoption and heterogeneous treatment effects. Our results show a small negative effect on total dependent employment of 0.5%, driven by a significant reduction in marginal employment of 2.4%. The extended specifications suggest additional effects of the minimum wage increases, as well as stronger negative effects for those regions that were strongly affected by the minimum wage in both periods.

Suggested Citation

  • Marco Caliendo & Nico Pestel & Rebecca Olthaus, 2024. "Long-Term Employment Effects of the Minimum Wage in Germany: New Data and Estimators," CEPA Discussion Papers 80, Center for Economic Policy Analysis.
    • Handle: RePEc:pot:cepadp:80
    DOI: 10.25932/publishup-66525
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    More about this item

    Keywords

    minimum wage; employment; regional bite;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • 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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