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The use of permanent contracts across Spanish regions: Do regional wage subsidies work?

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  • Yolanda Rebollo Sanz

    ()
    (Department of Economics, Universidad Pablo de Olavide)

  • Jose Ignacio García Pérez

    ()
    (Department of Economics, Universidad Pablo de Olavide)

Abstract

This paper evaluates the effect of regional wage subsidies to foster permanent employment for a sample of temporary and unemployed Spanish workers. We study the transition into permanent employment using a new dataset based on administrative Social Security registers named “La Muestra Continua de Vidas Laborales”, which is used for the first time to carry out policy evaluation exercises in the Spanish labor market. This dataset offers important advantages with respect to the Labour Force Survey, given it offers the complete labor history of the worker. Moreover, since we have individual, regional and time variation in our policy measure, we can apply a difference-in-differences estimator to identify the average treatment effect of this policy. Though, these regional policies have been implemented for almost ten years, as far as we know, this is the first attempt to evaluate them. Our main results are that, in average terms, this policy has positive but small effects on the transition rate into permanent employment either from a temporary contract or from unemployment. The incidence of these subsidies, however, is larger when the worker is in a temporary contract. It is also larger for young females while for old male workers do not have any effect. Measured at the average wage subsidy (5100 Euros) the total change in the entrance probability from a temporary to a permanent contract is around 26% for young women, 24% for middle age ones and 22% for middle age men, the most benefited workers. Nevertheless, since the transition rates to permanent contracts at the same firm are pretty low these relative changes hardly generate a change in the transition probability from a temporary to a permanent contract at the same firm. For instance, in the case of young women the estimated transition probability growths from 0.064% to 0.075% while for middle age men it changes from 0.039% to 0.041%.

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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 07.06.

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Length: 45 pages
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:pab:wpaper:07.06

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Keywords: Difference-in-Differences; Evaluation Analysis; Wage Subsidies; Competing Riks;

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Hora de recordarle al Gobierno los parados y los temporales
    by Samuel Bentolila in Nada Es Gratis on 2011-12-23 07:00:39
  2. Políticas activas de empleo: qué funciona y qué se consigue
    by Samuel Bentolila in Nada Es Gratis on 2013-11-12 06:55:33
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Cited by:
  1. Inmaculada Cebrián & Gloria Moreno & Luis Toharia, 2011. "La estabilidad laboral y los programas de fomento de la contratación indefinida," Hacienda Pública Española, IEF, IEF, vol. 198(3), pages 103-127, September.
  2. Ildefonso Mendez, 2013. "Promoting permanent employment: lessons from Spain," SERIEs, Spanish Economic Association, Spanish Economic Association, vol. 4(2), pages 175-199, June.
  3. Cervini-Plá, María & Ramos, Xavi & Silva, José I., 2010. "Wage Effects of Non-Wage Labour Costs," IZA Discussion Papers 4882, Institute for the Study of Labor (IZA).
  4. J. Ignacio Garcia-Perez & Fernando Muñoz Bullon, 2007. "Transitions into permanent employment in Spain : an empirical analysis for young workers," Business Economics Working Papers, Universidad Carlos III, Departamento de Economía de la Empresa wb073808, Universidad Carlos III, Departamento de Economía de la Empresa.
  5. J. Ignacio García Pérez & Victoria Osuna, 2012. "Dual Labour Markets and the Tenure Distribution: Reducing Severance Pay or Introducing a Single Contract?," Working Papers 2012-09, FEDEA.
  6. Cristina Barceló & Ernesto Villanueva, 2010. "The response of household wealth to the risk of losing the job: evidence from differences in firing costs," Banco de Espa�a Working Papers, Banco de Espa�a 1002, Banco de Espa�a.
  7. Yolanda Rebollo Sanz & J. Ignacio García-Pérez, 2009. "Do wage subsidies affect the subsequent employment stability of permanent workers?: the case of Spain," Working Papers, Universidad Pablo de Olavide, Department of Economics 09.18, Universidad Pablo de Olavide, Department of Economics.
  8. Yolanda Rebollo Sanz, 2009. "Landing a Permanent Contract: Do Job Interruptions and Employer Diversification Matter?," Working Papers, Universidad Pablo de Olavide, Department of Economics 09.07, Universidad Pablo de Olavide, Department of Economics.
  9. Fernández-Kranz, Daniel & Rodríguez-Planas, Núria, 2009. "The Part-Time Pay Penalty in a Segmented Labor Market," IZA Discussion Papers 4342, Institute for the Study of Labor (IZA).
  10. Sergi Jiménez Martín & Judit Vall Castello, 2009. "Business Cycle Effects on Labour Force Transitions for Older People in Spain," Working Papers 2009-25, FEDEA.
  11. J. Ignacio García-Pérez & Ioana Marinescu & Judit Vall Castello, 2014. "Can Fixed-Term Contracts Put Low Skilled Youth on a Better Career Path? Evidence from Spain," Working Papers 2014-08, FEDEA.
  12. Mario García-Ferreira & Ernesto Villanueva, 2007. "Employment risk and household formation: evidence from differences in firing costs," Banco de Espa�a Working Papers, Banco de Espa�a 0737, Banco de Espa�a.
  13. Escudero, Veronica, 2014. "Are active labour market policies effective in activating and integrating low-skilled individuals? An international comparison," MPRA Paper 55319, University Library of Munich, Germany.
  14. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2012. "The New New Labour Market Reform in Spain: Objectives, Instruments, and Shortcomings," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 10(2), pages 03-07, 08.
  15. Inmaculada Garcia & Colin Green & Maria Navarro Paniagua, 2012. "New Estimates of the Effect of Temporary Employment on Absenteeism," Working Papers 24151321, Lancaster University Management School, Economics Department.
  16. Vall Castello, Judit, 2012. "Promoting employment of disabled women in Spain; Evaluating a policy," Labour Economics, Elsevier, Elsevier, vol. 19(1), pages 82-91.
  17. Fernández-Kranz, Daniel & Lacuesta, Aitor & Rodríguez-Planas, Núria, 2010. "Chutes and Ladders: Dual Tracks and the Motherhood Dip," IZA Discussion Papers 5403, Institute for the Study of Labor (IZA).

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