%0 Report
        %A Galassi, Gabriela
        %T Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform
        %D 2021
        %8 2021 Apr
        %I Institute of Labor Economics (IZA)
        %C Bonn
        %7 IZA Discussion Paper
        %N 14248
        %U https://www.iza.org/index.php/publications/dp14248
        %X This paper analyzes how firms respond to changes in tax benefits for low-earning workers and how such policies also affect high-earning workers. I explore establishment outcomes around Germany's 2003 Mini-Job Reform, which expanded tax benefits for low-earning workers. I document that highly exposed establishments–high proportion of low-earning workers–increase their employees relative to non-exposed establishments–low proportion of such workers. 
This relative expansion is tilted towards high-earning workers, not targeted by the tax benefits. Nonexposed establishments substitute employment towards low-earning workers without expanding at the same pace. My findings are consistent with a model in which employment growth the policy intended is accompanied by a reallocation of employment and production between highly exposed firms and non-exposed firms, resulting in an efficiency loss.
        %K tax benefits
%K firm decisions
%K spillovers