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 the model 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; it allows for different job offer arrival rates for the employed and the unemployed and lets firms optimally choose their recruiting intensity. We find that unemployment is a non-monotonic function of the minimum wage level. Effects differ strongly by labor market segment defined by region, skill, and permanent worker ability. • Structural estimation of an equilibrium search model enables counterfactual minimum wage analyses. • The model includes firms’ recruitment intensity and allows for flexible offer arrival rates. • Unemployment is non-monotonic in the minimum wage level. • Effects differ by region, skill, and ability.