Template-Type: ReDIF-Paper 1.0

Author-Name: Matthias Collischon
Author-X-Name-First: Matthias 
Author-X-Name-Last: Collischon

Author-Name: Kamila Cygan-Rehm  
Author-X-Name-First: Kamila 
Author-X-Name-Last: Cygan-Rehm  

Author-Name: Regina T. Riphahn
Author-X-Name-First: Regina T. 
Author-X-Name-Last: Riphahn

Title: Employment effects of payroll tax subsidies
	
Abstract: 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.

Length: 43 pages
Creation-Date:  2020-03
File-URL: http://www.bgpe.de/texte/DP/191_Collischon_Cygan-Rehm_Riphahn.pdf
File-Format: Application/pdf
File-Function: First version, 2020
Number: 191
Classification-JEL: J21, J23, J38, C26
Keywords: wage subsidy, Minijob, labor demand, substitution effect, crowding out effect, displacement effect, employment, payroll tax

Handle: RePEc:bav:wpaper:191_CollischonCyganRehmRiphahn