BRIEF

DECIG Seminar: December

The Price and Employment Response of Firms to the Introduction of Minimum Wages

Sebastian Link (Center for Economic Studies and Ifo Institute, CESifo, and Ludwig Maximilian University of Munich, LMU)

Presenter:

Sebastian Link

Wednesday, December 6, 2023

10:00 – 11:00 AM (ET)

HYBRID SEMINAR: Webex and Room F-3K-E-400

Abstract

This paper studies the price and employment response of firms to the introduction of a nation-wide minimum wage in Germany. Widely throughout the economy, affected firms responded by rapidly and frequently increasing prices without cutting employment. These decisions are strongly interrelated: Firms that increased prices relatively more often also showed a less negative employment response. The relative importance of both adjustment margins is associated with product market competition and the specific economic situation firms face during the treatment period. Hence, understanding the role of price pass-through appears to be key for explaining employment effects of minimum wages.

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