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Pré-publication, Document de travail Année : 2023

Minimum Wages and Contract Duration in Germany

Résumé

We assess the effect of the introduction of a minimum wage policy of 8.50 EUR/hour in Germany in January 2015 on the probability of transitioning from fixed-term to open-ended contracts. Utilizing administrative data from social security records, we compare ex-ante affected (i.e., those earning below the minimum wage) workers against unaffected ones during the pre-implementation period, and find a significant decline in the probability that ex-ante affected workers employed under fixed-term contracts transition to open-ended contracts as the ending month of their fixed-term contract approaches January 2015, when the minimum wage policy was enforced. We interpret our empirical results through the lens of a job search model where firms use fixed-term contracts as a probation phase to learn about the matchspecific productivity with a given worker. In this model, firms sign open-ended contracts based on a productivity threshold rule. A sufficiently high minimum wage can push this threshold up, thus reducing the probability at which workers transition from fixed-term to open-ended contracts.
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Dates et versions

halshs-04289286, version 1 (16-11-2023)

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  • HAL Id : halshs-04289286 , version 1

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David Margolis, Victor Saldarriaga. Minimum Wages and Contract Duration in Germany. 2023. ⟨halshs-04289286⟩
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Dernière date de mise à jour le 05/05/2024
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