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Dual returns to experience

Author

Listed:
  • Jose Garcia-Louzao

    (Bank of Lithuania)

  • Laura Hospido

    (Banco de España and IZA)

  • Alessandro Ruggieri

    (University of Nottingham)

Abstract

This paper studies how labor market duality affects human capital accumulation and the wage trajectories of young workers in Spain. Using rich administrative data, we follow workers from their entry into the labor market to measure the experience accumulated under different contractual arrangements and we estimate their wage returns. We document lower returns on experience accumulated under fixed-term contracts compared with permanent contracts and show that this difference is not due to unobserved firm heterogeneity or the quality of the matching. Instead, we provide evidence that the gap in returns is due to lower human capital accumulation while working under fixed-term contracts. This difference widens with worker skill, suggesting that experience and skill-learning are complementary. Our results suggest that the widespread use of fixed-term work arrangements reduces the skill acquisition of highly-skilled workers, holding back life-cycle wage growth by up to 16 percentage points 15 years after their entry into the labor market.

Suggested Citation

  • Jose Garcia-Louzao & Laura Hospido & Alessandro Ruggieri, 2022. "Dual returns to experience," Working Papers 2211, Banco de España.
    • Handle: RePEc:bde:wpaper:2211
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    File URL: https://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/22/Files/dt2211e.pdf
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    Cited by:

    1. Pijoan-Mas, Josep & Roldan-Blanco, Pau, 2022. "Dual Labor Markets and the Equilibrium Distribution of Firms," CEPR Discussion Papers 17762, C.E.P.R. Discussion Papers.
    2. Burdin, Gabriel & Garcia-Louzao, Jose, 2025. "Employee-owned firms and the careers of young workers," Labour Economics, Elsevier, vol. 93(C).
    3. Lafuente, Cristina & Ruland, Astrid & Santaeulàlia-Llopis, Raül & Visschers, Ludo, 2023. "The effects of Covid-19 on couples’ job tenures: Mothers have it worse," Labour Economics, Elsevier, vol. 83(C).
    4. Brindusa Anghel & Laura Hospido & Julio Ortega & Ana V. Regil, 2024. "To be or not to be (employed): two decades of fluctuating earnings and income inequality in Spain," Fiscal Studies, John Wiley & Sons, vol. 45(3), pages 415-428, September.
    5. Josep Pijoan-Mas & Pau Roldan-Blanco, 2025. "Dual Labor Markets and the Equilibrium Distribution of Firms," Working Papers 1531, Barcelona School of Economics.
    6. J. Ignacio Conde-Ruiz & Jorge Fernández Orellana & Manu García & Daniel Pérez Gutiérrez, 2025. "Protección Laboral en un Mercado Dual: Lecciones de una Pandemia," Studies on the Spanish Economy eee2025-18, FEDEA.

    More about this item

    Keywords

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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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