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Declining returns to skill and the distribution of wages : Spain 1995-2006

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  • Raquel Carrasco
  • Juan F. Jimeno
  • A. Carolina Ortega

Abstract

In contrast to the pattern observed in other developed countries, Spanish wage inequality did not increase during the period from 1995-2006. In this paper we analyse the relative role of supply and demand factors when accounting for this “atypical” fact. Because noticeable changes in both labour supply and labour demand - such as educational upgrading of the labour force, huge immigration flows, and a boom in the construction sector - took place during these years, we start by decomposing observed wage changes into changes in the composition of the labour force and changes in the prices of workers’ and jobs’ characteristics. The results indicate that the compression of the wage distribution is largely explained by a decrease in the returns to education. We also provide some evidence of the relative impact of labour supply and labour demand factors on the changes of these returns, showing that both the increase in the supply of high-skilled workers and the increasing weight of low-skilled occupations are related to the decreasing trend in the skill premium over this period.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1231.

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Date of creation: Nov 2012
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Handle: RePEc:cte:werepe:we1231

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Keywords: Wage structure; Quantile regressions; Composition effects; Polarization;

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  1. Angel de la Fuente & Juan Francisco Jimeno, 2009. "The Private and Fiscal Returns to Schooling in the European Union," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1319-1360, December.
  2. Maarten Goos & Alan Manning, 2003. "Lousy and Lovely Jobs: the Rising Polarization of Work in Britain," CEP Discussion Papers dp0604, Centre for Economic Performance, LSE.
  3. James Albrecht & Anders Bjorklund & Susan Vroman, 2003. "Is There a Glass Ceiling in Sweden?," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 145-177, January.
  4. Pijoan-Mas, Josep & Sánchez-Marcos, Virginia, 2009. "Spain is Different: Falling Trends of Inequality," CEPR Discussion Papers 7489, C.E.P.R. Discussion Papers.
  5. Katz, Lawrence F & Murphy, Kevin M, 1992. "Changes in Relative Wages, 1963-1987: Supply and Demand Factors," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 35-78, February.
  6. Wiji Arulampalam & Alison Booth & Mark L. Bryan, 2006. "Is There a Glass Ceiling over Europe? Exploring the Gender Pay Gap across the Wages Distribution," CEPR Discussion Papers 510, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  7. Aitor Lacuesta & Mario Izquierdo, 2012. "The contribution of changes in employment composition and relative returns to the evolution of wage inequality: the case of Spain," Journal of Population Economics, Springer, vol. 25(2), pages 511-543, January.
  8. Albrecht, James & Björklund, Anders & Vroman, Susan, 2009. "Unionization and the Evolution of the Wage Distribution in Sweden: 1968 to 2000," IZA Discussion Papers 4246, Institute for the Study of Labor (IZA).
  9. Raquel Carrasco & Juan Jimeno & A. Ortega, 2008. "The effect of immigration on the labor market performance of native-born workers: some evidence for Spain," Journal of Population Economics, Springer, vol. 21(3), pages 627-648, July.
  10. Hipólito Simón & Esteban Sanromá & Raúl Ramos, 2008. "Labour segregation and immigrant and native-born wage distributions in Spain: an analysis using matched employer–employee data," Spanish Economic Review, Springer, vol. 10(2), pages 135-168, June.
  11. Juan Canal-Domínguez & César Rodríguez-Gutiérrez, 2008. "Analysis of wage differences between native and immigrant workers in Spain," Spanish Economic Review, Springer, vol. 10(2), pages 109-134, June.
  12. Raquel Carrasco & Juan F. Jimeno & Ana Carolina Ortega, 2004. "The Effect Of Immigration On The Employment Opportunities Of Native-Born Workers: Some Evidence For Spain," Economics Working Papers we046122, Universidad Carlos III, Departamento de Economía.
  13. Florentino Felgueroso & Manuel Hidalgo & SergiJiménez Martín, 2010. "Explaining the fall of the skill wage premium in Spain," Working Papers 2010-19, FEDEA.
  14. Maarten Goos & Alan Manning, 2003. "Lousy and lovely jobs: the rising polarization of work in Britain," LSE Research Online Documents on Economics 20002, London School of Economics and Political Science, LSE Library.
  15. Melly, Blaise, 2005. "Decomposition of differences in distribution using quantile regression," Labour Economics, Elsevier, vol. 12(4), pages 577-590, August.
  16. Buchinsky, Moshe, 1994. "Changes in the U.S. Wage Structure 1963-1987: Application of Quantile Regression," Econometrica, Econometric Society, vol. 62(2), pages 405-58, March.
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