Ruhr Economic Papers

Ruhr Economic Papers #348

The Employment Effect of Industry-Specific, Collectively-Bargained Minimum Wages

by Hanna Frings

RWI, 07/2012, 33 S./p., 8 Euro, ISBN 978-3-86788-401-3 DOI: 10.4419/86788401

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Abstract

This paper estimates the employment effects of industry-specific, collectively-bargained minimum wages in Germany for two occupations associated with the construction sector. I propose a truly exogenous control group in contrast to the control group design used in the literature. Further, a difference-in-differences-in-differences estimator is presented as a robustness test for occupation-specific and/or industry-specific, timevarying, unobserved heterogeneity. I do not find a significantly negative employment effect, even though the minimum wage is binding in (East) Germany. This result can be explained by substitution effects, noncompliance and models of monopsonic competition.

JEL-Classification: J38, J42

Keywords: Minimum wage; monopsonic competition; difference-in-differences

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