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The Perfect Storm: Graduating in a Recession in a Segmented Labor Market

Listed author(s):
  • Fernández-Kranz, Daniel

    ()

    (IE Business School, Madrid)

  • Rodríguez-Planas, Núria

    ()

    (Queens College, CUNY)

Registered author(s):

    This paper analyzes the effects of entry labor-market conditions on workers' career in Spain, a country well known for its highly segmented labor market and rigid labor-market institutions. In contrast with more flexible labor markets, we find that the annual earnings losses of individuals without a university degree are greater and more persistent than those of college graduates. For workers without a college degree, the effect is driven by a lower likelihood of employment. For college graduates, the negative impact on earnings is driven by both a higher probability of non-employment, and employment in jobs with fixed-term contracts. While a negative shock increases mobility of college graduates across firms and industries, there is no earnings recovery, just secondary labor-market job churning. Our results are consistent with tight regulations of the Spanish labor market such as binding minimum wages and downward wage rigidity caused by collective bargaining agreements.

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    File URL: http://ftp.iza.org/dp10597.pdf
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    Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 10597.

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    Length: 46 pages
    Date of creation: Feb 2017
    Publication status: forthcoming in: Industrial Labor Relations Review
    Handle: RePEc:iza:izadps:dp10597
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