When the minimum wage really bites hard: impact on top earners and skill supply

Gregory, Terry ; Zierahn, Ulrich

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URL: https://madoc.bib.uni-mannheim.de/57686
URN: urn:nbn:de:bsz:180-madoc-576864
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-042
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: J31 , J38 , J24 , C21 , J23,
Keywords (English): minimum wages , wage effects , spillover effects , wage restraints , returns to skills , unconditional quantile regression , scale effect , substitution effect , skill supply
Abstract: We investigate minimum wage spillovers by exploiting the first-time introduction of aminimum wage within a quasi-experiment in a context with an extraordinary large bite: theGerman roofing industry. We find positive wage spillovers for medium-skilled workers withwages just above the minimum wage, but negative effects for high-skilled top earners in EastGermany, where the bite was particularly pronounced. There, the minimum wage loweredboth returns to skills and skill supply. We propose a theoretical model according to whichnegative spillovers occur whenever a negative scale effect dominates a positive substitutioneffect and provide empirical support for our theory.

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