Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/49410 
Year of Publication: 
2010
Series/Report no.: 
DIW Discussion Papers No. 1061
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
In this paper employment effects of a sectoral minimum wage in the German construction sector are estimated from a single cross-sectional wage distribution using parametric and semi-parametric models. Parametric functional form assumptions seem too restrictive and lead to implausible results. We suggest semi-parametric censored quantile regression models to relax these assumptions and find that employment levels would be 4-5% higher without the minimum wage in the East German construction sector. That the effect for the West is clearly smaller (only 1-2%) is theoretically plausible, since the level of the minimum wage in East Germany was set much higher in relation to the wage distribution. There is heterogeneity hidden in the mean effect: employment losses are mostly borne by young construction workers, employees not covered by collective bargaining agreements and individuals working in small establishments. Although the paper confirms previous findings of a negative employment effect for East Germany, its magnitude is substantially larger than previously estimated.
Subjects: 
Minimum wage
wage distribution
employment effects
labor demand
JEL: 
J23
J31
J38
Document Type: 
Working Paper

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