Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/330619 
Year of Publication: 
2025
Citation: 
[Journal:] International Tax and Public Finance [ISSN:] 1573-6970 [Volume:] 32 [Issue:] 5 [Publisher:] Springer US [Place:] New York, NY [Year:] 2025 [Pages:] 1501-1531
Publisher: 
Springer US, New York, NY
Abstract: 
Many countries subsidize low-income employments or small jobs. These subsidies and their phasing out can generate labor market frictions and distort incentives. The German Minijob program subsidizes low-income jobs. It generates a 'Minijob trap' with substantial bunching along the earnings distribution. Since 2003, the newly introduced Midijob subsidy aims to reduce the Minijob-induced notch in the net earnings distribution. Midijobs reduce payroll taxes for employments above the Minijob earnings ceiling. We investigate whether introducing Midijobs reduced the Minijob trap. We apply a regression discontinuity design using administrative data and a difference-in-differences estimation using survey data. While in both cases our results show a small positive overall effect of Midijobs on transitions out of Minijobs, they are effective only for a narrow treatment group.
Subjects: 
Midijobs
Minijobs
Payroll tax subsidy
Causal effects
Difference-in-differences
Regression discontinuity
SOEP
SIAB
JEL: 
J21
J38
H24
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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