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Do wage subsidies affect the subsequent employment stability of permanent workers?: the case of Spain

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Author Info

  • Yolanda Rebollo Sanz

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

  • J. Ignacio García-Pérez

    ()
    (Universidad Pablo de Olavide, FEDEA & FCEA)

Abstract

This article studies how job creation subsidies designed for several Spanish regional governments to foster the creation of new permanent contracts during the period 1997-2004 might affect the subsequent employment stability of the eligible workers. We use a triple difference approach that focuses on regional and temporal variability in individual eligibility conditions of these subsidies to obtain the causal effect of the policy. Our data comes from the Muestra Continua de Vidas Laborales (MCVL) and from a database that contains information on the policy analyzed. Our main result is that workers who are eligible for these subsidies face a higher probability of exiting from their current permanent contract than those who do not. These effects vary by age and gender, as well as by contract duration and contract type. This result is particularly relevant for male workers whose contracts also benefited with nationally subsidized payroll deductions and for women with such deductions but only during their first year of employment. During that initial first-year period, the exit rate among eligible workers in our sample increased by 9%, 21% and 16% for younger, middle-aged and older female workers, respectively, and by about 13% and 25% for younger and older male workers, respectively.

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File URL: http://www.upo.es/serv/bib/wps/econ0918.pdf
File Function: First version, 2009
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 09.18.

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Length: 33 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:pab:wpaper:09.18

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Keywords: labour market rotation; permanent contracts; wage subsidies; triple difference; causal inference; average treatment effects; duration model.;

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  1. Bruce D. Meyer, 1994. "Natural and Quasi- Experiments in Economics," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0170, National Bureau of Economic Research, Inc.
  2. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding Are Legal Limits? Transitions from Temporary to Permanent Work in Spain," IZA Discussion Papers 782, Institute for the Study of Labor (IZA).
  3. Mortensen, Dale T & Pissarides, Christopher, 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2989, C.E.P.R. Discussion Papers.
  4. Hernanz, Virginia & Jimeno, Juan Francisco & Kugler, Adriana D., 2003. "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labour Market Reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3724, C.E.P.R. Discussion Papers.
  5. F. Alfonso Arellano, 2005. "Evaluating The Effects Of Labour Market Reforms “At The Margin” On Unemployment And Employment Stability: The Spanish Case," Economics Working Papers we051205, Universidad Carlos III, Departamento de Economía.
  6. Yolanda F. Rebollo & J. Ignacio Pérez, 2008. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Economic Working Papers at Centro de Estudios Andaluces, Centro de Estudios Andaluces E2008/09, Centro de Estudios Andaluces.
  7. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series, IFAU - Institute for Evaluation of Labour Market and Education Policy 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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Cited by:
  1. Bentolila, Samuel & Cahuc, Pierre & Dolado, Juan J. & Le Barbanchon, Thomas, 2010. "Two-Tier Labor Markets in the Great Recession: France vs. Spain," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8152, C.E.P.R. Discussion Papers.
  2. Samuel Bentolila & Pierre Cahuc & Juan José Dolado & Thomas Le Barbanchon, ., 2010. "Unemployment and Temporary Jobs in the Crisis: Comparing France and Spain," Working Papers 2010-07, FEDEA.
  3. José Ignacio Conde Ruiz & Florentino Felgueroso & Jose Ignacio García Pérez, 2011. "Reforma Laboral 2010: Una primera evaluación y propuestas de mejora," Economic Reports 01-2011, FEDEA.
  4. José Ignacio Conde Ruiz & Florentino Felgueroso & Jose Ignacio García Pérez, 2010. "Las reformas laborales en España: un modelo agotado," Economic Reports 11-2010, FEDEA.
  5. 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.
  6. Olga Kuzmina, 2013. "Operating Flexibility and Capital Structure: Evidence from a Natural Experiment," Working Papers w0197, Center for Economic and Financial Research (CEFIR).

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