Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/279161 
Year of Publication: 
2023
Series/Report no.: 
CESifo Working Paper No. 10412
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
This paper studies the employment and reallocation effects of minimum wages in Germany in a search-and-matching model with endogenous job search effort and vacancy posting, multiple employment levels, a progressive tax-transfer system, and worker and firm heterogeneity. I find that minimum wages up to 70% of the median wage significantly increase productivity, hours worked and output without reducing employment. In frictional labor markets, however, reallocation takes time whenever the minimum wage cuts deep into the wage distribution. I show that gradually implementing a high minimum wage is necessary to avoid elevated unemployment rates during the transition.
Subjects: 
minimum wage
reallocation
employment
job search
worker and firm heterogeneity
hours worked
equilibrium search-and-matching model
transition dynamics
JEL: 
E24
E25
E64
J20
J31
J38
Document Type: 
Working Paper
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