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Empirical Economics

, Volume 46, Issue 4, pp 1429–1446 | Cite as

Building the minimum wage: the distributional impact of Germany’s first sectoral minimum wage on wages and hours across different wage bargaining regimes

  • Pia Rattenhuber
Article

Abstract

The first minimum wage in Germany was introduced in 1997 for blue-collar workers in sub-sectors of the construction industry. In the setting of a natural experiment, blue-collar workers in neighboring 4-digit industries and white-collar workers are used as control groups for differences-in-differences-in-differences estimation based on linked employer–employee data. Estimation results reveal a sizable positive impact on mean wages in East Germany, but no significant effect in West Germany. Size and significance of effects are neither homogeneous across wage regimes (individual vs. collective contracts) nor across the distribution. The patterns suggest a compression in the lower part of the wage distribution and spillover effects to wages where the minimum is not binding, even in West Germany, where the bite of the MW was low. No effects on hours of work or substitution between workers of different qualification levels are found.

Keywords

Minimum wage Wages and hours of work Differences-in-differences-in-differences Unconditional quantile regression Construction sector Linked employer–employee data 

JEL Classification

C21 J31 J38 

Notes

Acknowledgments

I thank Viktor Steiner, Kai-Uwe Müller, Peter Haan, Magne Mogstad and participants of the Economic Policy Seminar of Free University Berlin, the BeNA seminar and from the 2010 conference of the Verein für Socialpolitik for their very valuable comments and suggestions. Martin Gornig and Gregor Asshoff graciously shared information on the construction sector. I owe particular thanks to all the staff at the Federal Research Data Centre of the State Statistical Institute Berlin-Brandenburg.

Supplementary material

181_2013_726_MOESM1_ESM.pdf (70 kb)
Supplementary material 1 (pdf 70 KB)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.German Institute for Economic Research Berlin (DIW)BerlinGermany

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