Minimum wages and female labor supply in Germany

Abstract

We study the labor-supply effects of subsidized minimum wages in a structural household model with married and single households. In the model, married women's hours react relatively strongly to minimum wages due to substitution effects within the home production of couples while other population groups show ambiguous reactions. An empirical analysis for Germany shows that minimum wages would affect total labor supply only weakly while, in our baseline experiments, married women's average hours increase by 3-6%. Further, we finnd that costs of a subsidized minimum wage are high and increase sharply in its level while its labor-supply effects level out.