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The Puzzling Fall of the Wage Skill Premium in Spain

Listed author(s):
  • Florentino Felgueroso
  • Manuel Hidalgo-Pérez
  • Sergi Jiménez-Martín

In contrast to most EU countries and other developed economies, the Wage Skill Premium (WSP) has been steadily falling over the past decades in Spain. The main purpose of this work is to document and explain the fall in the WSP in Spain over the past two decades using Social Security data. Our estimation procedure follows and extends Dustman and Meghir (2005), which allows us to estimate the returns to various sources of experience, as well as seniority, while controlling for the likely biases and endogeneity associated with these models. The results reveal that the fall in the WSP can be explained in part by an increase in the share of college graduates that are mismatched, that is, working in positions for which they are a priori overeducated. However, this phenomenon only partially explains the fall in the WSP: differences between high and low-educated workers in the returns to all types of experiences and tenure have been substantially reduced since the end of the 90s.

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File URL: http://hdl.handle.net/10.1111/manc.12116
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Article provided by University of Manchester in its journal The Manchester School.

Volume (Year): 84 (2016)
Issue (Month): 3 (06)
Pages: 390-435

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Handle: RePEc:bla:manchs:v:84:y:2016:i:3:p:390-435
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  1. Florentino Felgueroso & Maria Gutiérrez-Domènech & Sergi Jiménez-Martín, 2014. "Dropout trends and educational reforms: the role of the LOGSE in Spain," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-24, December.
  2. 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;European Society for Population Economics, vol. 25(2), pages 511-543, January.
  3. Rebekka Christopoulou & Juan F. Jimeno & Ana Lamo, 2010. "Changes in the wage structure in EU countries," Working Papers 1017, Banco de España;Working Papers Homepage.
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