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This thesis offers new insights on the effects of Start-Up Subsidies (SUS) for unemployed individuals as a special kind of active labor market program (ALMP) that aims to re-integrate individuals into the labor market via the route of self-employment. Moreover, this thesis contributes to the literature on methods for causal inference when the treatment variable is continuous rather than binary. For example, this is the case when individuals differ in their degree of exposure to a common treatment.
The analysis of the effects of SUS focuses on the main current German program called “Gründungszuschuss” (New Start-Up Subsidy, NSUS) after its reform in 2011. Average Effects on participants' labor market outcomes - as measured by employment and earnings - as well as subjective well-being are estimated mainly based on propensity score matching (PSM) techniques. PSM aims to achieve balance in terms of observed characteristics by matching participants with at least one comparable non-participant in terms of their probability to receive the treatment. This estimation strategy is valid as long as all relevant characteristics that explain selection patterns into treatment are observed and included in the estimation of the propensity score. To make our analysis as credible as possible, we control for a large vector of characteristics as observed through the combination of rich administrative data from the Federal Employment Agency as well as through survey data.
Chapters two to four of this thesis puts special emphasis on aspects regarding (the evaluation of) SUS programs that have received no or only limited attention thus far. The first aspect relates to the interplay of institutional details of the program and its effectiveness. So far, relatively little is known about the importance of SUS program features such as the duration of support. Second, there is no experimental benchmark evaluation of SUS available and thus, the reliability of non-experimental estimation techniques such as PSM is of crucial importance as estimates are biased when relevant confounders are omitted from the analysis. Third, there may be potentially detrimental effects of transitioning into (relatively risky) self-employment on subjective well-being among subsidized founders out of unemployment. These were to remain undetected if the analysis would focus exclusively on labor market outcomes of participants. The results indicate positive long-term effects of SUS participation on employment and earnings among participants. These effects are substantially larger than what estimated before the reform, indicating room for improvement in program design via changes in institutional details. Moreover, non-experimental estimates of treatment effects are remarkably robust to hidden confounding. Regarding subjective well-being, this thesis finds a positive long-run impact on job satisfaction and a detrimental effect on satisfaction with social security. The latter appears to be driven by adverse effects on social insurance contributions.
In chapter five, a novel automated covariate balancing technique for the estimation of causal effects in the context of continuous treatments is derived and assessed regarding its performance compared to other (automated) balancing techniques. Although binary research designs that only differentiate between participants and non-participants of some treatment remain the most-common case in empirical practice, many applications can be adapted to include continuous treatments as well. Often, this will allow for more meaningful estimates of causal effects in order to further improve the design of programs. In the context of SUS, one may further investigate the effects of the size of monetary support or its duration on participants' labor market outcomes. Both Monte-Carlo investigations and analysis of two well-known datasets suggests superior performance of the proposed Entropy Balancing for continuous treatments (EBCT) compared to other existing estimation strategies.
On January 1, 2015, Germany introduced a general statutory minimum wage of €8.50 gross per hour. This thesis analyses the effects of the minimum wage introduction in Germany as well as wage floors in the European context, contributing to national and international research.
The second chapter of this dissertation summarizes the short-run effects of the minimum wage reform found in previous studies.
We show that the introduction of the minimum wage had a positive effect on wages at the bottom of the distribution. Yet, there was still a significant amount of non-compliance shortly after the reform. Additionally, previous evidence points to small negative employment effects mainly driven by a reduction in mini-jobs. Contrary to expectations, though, there were no effects on poverty and general inequality found in the short run. This is mostly due to the fact that working hours were reduced and the increase of hourly wages was therefore not reflected in monthly wages.
The third chapter identifies whether the job losses predicted in ex-ante studies materialized in the short run and, if so, which type of employment was affected the most. To identify the effects, this chapter (as well as chapter four) uses a regional difference-in-difference approach to estimate the effects on regular employment (part- and full-time) and mini-jobs.
Our results suggest that the minimum wage has slightly reduced overall employment, mainly due to a decline in mini-jobs.
The fourth chapter has the same methodological approach as the previous one. Its motivated by the fact that women are often overrepresented among low-wage employees. Thus, the primary research question in this chapter is whether the minimum wage has led to a narrowing of the gender wage gap. In order to answer that, we identify the effects on the wage gap at the 10th and 25th percentiles and at the mean of the underlying gender-specific wage distributions. Our results imply that for eligible employees the gender wage gap at the 10th percentile decreased by 4.6 percentage points between 2014 and 2018 in high-bite regions compared to low-bite regions. We estimate this to be a reduction of 32% compared to 2014. Higher up the distribution – i.e. at the 25th percentile and the mean – the effects are smaller and not as robust.
The fifth chapter keeps the gender-specific emphasis on minimum wage effects. However, in contrast to the rest of the dissertation, it widens the scope to other European Union countries. Following the rationale of the previous chapter, women could potentially benefit particularly from a minimum wage. However, they could also be more prone to suffer from the possibly induced job losses or reductions in working hours. Therefore, this chapter summarizes existing evidence from EU member states dealing with the relationship between wage floors and the gender wage gap. In addition, it provides a systematic summary of studies that examine the impact of minimum wages on employment losses or changes in working hours that particularly affect women. The evidence shows that higher wage floors are often associated with smaller gender wage gaps. With respect to employment, women do not appear to experience greater employment losses than men per se. However, studies show that the minimum wage has a particular impact on part-time workers. Therefore, it cannot be ruled out that the negative correlation between the minimum wage and the gender wage gap is related to the job losses of these lower-paid, often female, part-time workers. This working arrangement should therefore be specially focused on in the context of minimum wages.