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Inspections and Compliance: Enforcement of the Minimum-Wage Law

Aufsätze referiert extern - Web of Science

Mattis Beckmannshagen, Alexandra Fedorets

In: Finanzarchiv 77 (2021), 1, S. 1-58


This paper is the first to empirically study the relationship between spatial distributions oflabor market inspections and noncompliance with Germany’s minimum-wage law. Combiningnovel administrative data with large-scale longitudinal survey data, we documentthat the inspection probability is higher in regions with higher noncompliance. This impliesrisk-based allocation of the inspection efforts and, hence, its endogeneity. Usingfixed effects and an instrumental-variable approach, we show that higher inspection effortshave a limited effect on compliance. Based on a theoretical framework and internationalevidence, we discuss challenges for law enforcement, the political importance ofcompliance, and possible improvement measures.

JEL-Classification: K31;K42;J30
Keywords: minimum wage, noncompliance, enforcement