Unemployment Effects of the German Minimum Wage in an Equilibrium Job Search Model

We structurally estimate an equilibrium search model using German administrative data and use this for counterfactual analyses of a uniform minimum wage. The model with worker and firm heterogeneity does not restrict the sign of employment effects a priori and allows for different job offer arrival rates for the employed and the unemployed. We find that unemployment is a non-monotonic function of the minimum wage level. Effects differ strongly by labour market segment. Cross-segment variation of the estimated effects is mostly driven by firm productivity levels rather than by search frictions or the opportunity cost of employment.