Fiscal Effects of Minimum Wages: An Analysis for Germany |
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Authors: | Thomas K Bauer Jochen Kluve Sandra Schaffner Christoph M Schmidt |
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Institution: | RWI, Essen, Ruhr-Universität, Bochum, and IZA, Bonn; RWI, Essen and IZA, Bonn; RWI, Essen; RWI, Essen, Ruhr-Universität, Bochum, CEPR, London, and IZA, Bonn |
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Abstract: | Abstract. Against the background of the current discussion of statutory minimum wages in Germany, this paper analyzes the potential employment and fiscal effects of such a policy. Based on estimated labor demand elasticities obtained from a structural labor demand model, the empirical results imply that minimum wages in Germany will be associated with significant employment losses among marginal and low- and semi-skilled full-time workers. Even though minimum wages will lead to increased public revenues from income taxes and social security benefits, they will result in a significant fiscal burden, due to increased unemployment benefits and decreased revenues from corporate taxes. |
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Keywords: | H60 J31 J88 |
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