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Minimum Wages as a Barrier to Entry: Evidence from G ermany
Author(s) -
Bachmann Ronald,
Bauer Thomas K.,
Frings Hanna
Publication year - 2014
Publication title -
labour
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.403
H-Index - 34
eISSN - 1467-9914
pISSN - 1121-7081
DOI - 10.1111/labr.12034
Subject(s) - competition (biology) , productivity , order (exchange) , barriers to entry , minimum wage , labour economics , economics , service (business) , wage , set (abstract data type) , business , industrial organization , market structure , economy , computer science , finance , macroeconomics , biology , ecology , programming language
This study analyses employers' support for the introduction of industry‐specific minimum wages as a cost‐raising strategy in order to deter market entry. Using a unique data set consisting of 800 firms in the G erman service sector, we show that high‐productivity employers support minimum wages. We further find some evidence that minimum wage support is higher in industries and regions with low barriers to entry. This is particularly the case in E ast G ermany, where the perceived threat of low‐wage competition from C entral and E astern E uropean countries is relatively high. In addition, firms paying collectively agreed wages are more strongly in favour of minimum wages.