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Accounting for changes in the Spanish wage distribution: the role of employment Composition effects

  • Raquel Carrasco

    (Universidad Carlos III)

  • Juan F. Jimeno

    ()

    (Banco de España)

  • A. Carolina Ortega

    (Universidad Nacional de Tucumán)

Despite a rapid decrease in unemployment and strong GDP and employment growth, real wages barely increased in Spain over the period 1995-2006. An explanation of this lack of growth may rely on employment composition effects derived from structural changes, such as the rise in the weights of employment in the construction and services sectors, the increase in female employment participation, and the arrival of large immigration inflows. Using data from three waves of the Structure of Earnings Survey, we break down observed wage changes into those due to varying worker and job characteristics and variations of the returns to those characteristics. Quantile regressions are used to estimate wage equations at different percentiles and to construct the counterfactual wage distributions that would have been observed had individual and job characteristics remain constant over time. Our main finding is that the lack of growth of Spanish real wages over the period 1995-2006 is mainly due to the decrease of returns to characteristics, specially education and labour market experience, which is more noticeable at the upper deciles of the wage distribution, and not to changes in employment composition, which when taken over a wide set of worker and job characteristics, had positive effects on wages.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/11/Fich/dt1120e.pdf
File Function: First version, September 2011
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1120.

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Length: 32 pages
Date of creation: Sep 2011
Date of revision:
Handle: RePEc:bde:wpaper:1120
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  1. Martinez-Sanchis, Elena & Mora, Juan & Kandemir, Ilker, 2012. "Counterfactual distributions of wages via quantile regression with endogeneity," Computational Statistics & Data Analysis, Elsevier, vol. 56(11), pages 3212-3229.
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