Short-term macroeconomic evaluation of the German minimum wage with a VAR/VECM

The German minimum wage was introduced in January 2015. This paper investigates the short-term macroeconomic impacts of its introduction. Therefore, an estimated VAR/VECM is used to perform forecasts that are interpreted as counterfactual to the introduction of the minimum wage and compared to actual developments of six key macroeconomic variables. The deviations are interpreted as minimum wage effects. Robustness checks as well as a comparison with descriptive empirical results are performed to assess the validity of the results. Overall, small positive price effects, significant positive wage effects, and positive employment effects although not robustly estimated in their magnitude are found.