Employment Effects of Payroll Tax Subsidies

Arbeitspapier

This paper exploits several reforms of wage subsidies in the framework of the German Minijob program to investigate substitution and complementarity relationships between subsidized and non-subsidized labor demand. We apply an instrumental variables approach and use administrative data on German establishments for the period 1999-2014. Particularly in small establishments (0-9 employees), subsidized Minijob employment comprises large shares of the work force, on average over 40 percent. For these establishments, robust evidence shows that increasing the subsidization of Minijob employment crowds out non-subsidized employment. Our results imply that Minijob employment in 2014 may have eliminated more than 0.5 million unsubsidized employment relationships just in small establishments. This represents an unintended and harmful consequence of the Minijob subsidy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 13037

Classification and Topics

• Classification: Wirtschaft ; Labor Force and Employment, Size, and Structure ; Labor Demand ; Wages, Compensation, and Labor Costs: Public Policy ; Single Equation Models: Single Variables: Instrumental Variables (IV) Estimation
• Subject: wage subsidy ; Minijob ; labor demand ; substitution effect ; crowding out effect ; displacement effect ; employment ; payroll tax

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Collischon, Matthias ; Cygan-Rehm, Kamila ; Riphahn, Regina T.
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/216349
• Last update: 10.03.2025, 11:42 AM CET