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The Employment Effect of Industry-Specific, Collectively Bargained Minimum Wages


Address for correspondence: Hanna Frings, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Hohenzollernstr. 1-3, 45128 Essen, Germany. Tel.: +49 201 8149 265; fax: +49 201 8149 200; e-mail:


This study estimates the employment effects of industry-specific, collectively bargained minimum wages in Germany for two occupations associated with the construction sector. I propose a truly exogenous control group in contrast to the control group design used in the literature. Further, a difference-in-differences-in-differences estimator is presented as a robustness test for occupation-specific and/or industry-specific, time-varying, unobserved heterogeneity. I do not find a significantly negative employment effect, even though the minimum wage is binding in (East) Germany. Possible explanations include substitution effects, non-compliance and models of monopsonic competition.