TY  - RPRT
        AU  - Galassi, Gabriela
        TI  - Labor Demand Response to Labor Supply Incentives: Lessons from the German Mini-Job Reform
        PY  - 2021/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 14248
        UR  - https://www.iza.org/index.php/publications/dp14248
        AB  - 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.
        KW  - tax benefits
KW  - firm decisions
KW  - spillovers
        ER  -