Mattis Beckmannshagen, Alexandra Fedorets

Inspections and Compliance: Enforcement of the Minimum-Wage Law

Section: Articles
FinanzArchiv (FA)

Volume 77 () / Issue 1, pp. 1-58 (58)
Published 26.02.2021

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This paper is the first to empirically study the relationship between spatial distributions of labor market inspections and noncompliance with Germany's minimum-wage law. Combining novel administrative data with large-scale longitudinal survey data, we document that the inspection probability is higher in regions with higher noncompliance. This implies risk-based allocation of the inspection efforts and, hence, its endogeneity. Using fixed effects and an instrumental-variable approach, we show that higher inspection efforts have a limited effect on compliance. Based on a theoretical framework and international evidence, we discuss challenges for law enforcement, the political importance of compliance, and possible improvement measures.

Mattis Beckmannshagen No current data available.

Alexandra Fedorets No current data available.