Short and medium run effects on the minimum wage reform in Germany using a Diff-in-Diff approach

Abstract

The aim of this dissertation is to evaluate the impact of the minimum wage reform established in 2015 in Germany in the short and medium run. The causal effects are particularly interesting from an economic and a social point of view. Indeed, minimum wage policies can impact income distribution, employment level, and social welfare status, improving living and work conditions. Also, in the European Union there is an ongoing debate about minimum wage, after the proposal for a Directive of the European Parliament and the Council on adequate minimum wages in October 2020. From a theoretical perspective, the effects of a minimum wage reform are ambiguous, thus it is important to analyse the effects from an empirical point of view. For this purpose, I use the German Socio-Economic Panel (GSOEP) to analyse the effects of the reform. The thesis is organized as follow: in the first part I examine the relationship between minimum wage and labour economics, then I analyse the minimum wage reform in Germany, from its introduction in 2015 with a statutory minimum wage of 8.50 euros per hour, to its implementation across the years. Further, I study the literature about minimum wage. In the second part I analyse the panel dataset and the implications of the reform on employment, and marginal employment. The empirical strategy consists in using a Diff-in-Diff approach, taking into consideration the differences in gender, birth cohorts, education levels and regional differences.