"Utilizing the link between employment and price changes as a result of minimum wages, we use firm-level data to evaluate the effect of minimum wage introduction in the German construction sector. In East Germany we find significant positive price effects that exclude the possibility of rising employment. Rather, the results indicate the existence of a competitive sector-specific labour market, and thus declining employment. In contrast, we cannot find any significant price reaction for West Germany. This suggests that the implemented minimum wage in West Germany is too low in comparison to the predominantly paid wages and is hence not binding."

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