Duncan Roth (IAB)
Gabriel Ahlfeldt, Tobias Seidel and Jens Wrona
Dustmann et al. (2022) document that the German minimum wage introduced in 2015 led to the reallocation of workers from less to more productive establishments. We analyze the spatial heterogeneity of this reallocation effect within a quantitative spatial model with firm heterogeneity and monopsonistic labour markets, which we quantify for Germany. The model generates reallocation from less to more productive establishments in low-productivity regions, but also reallocation from more to less productive establishments in high-productivity regions. Using solely data that precedes the minimum wage, the model predicts reallocation effects for German micro-regions based that are closely correlated with before-after changes observed in data.