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Dual Returns to Experience

Author

Listed:
  • Laura Hospido

    (Banco de Espana and IZA)

  • Jose Garcia-Louzao

    (Bank of Lithuania and Vilnius University)

  • Alessandro Ruggier

    (University of Nottingham)

Abstract

In this paper we study how labor market duality affects human capital accumulation and wage trajectories of young workers. Using rich administrative data for Spain, we follow workers since their entry into the labor market to measure experience accumulated under different contractual arrangements and we estimate their wage returns. We document lower returns to experience accumulated in fixed-term contracts compared to permanent contracts and show that this difference is not due to unobserved firm heterogeneity or match quality. 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 ability, in line with skill-learning complementarity. Our results suggest that the widespread use of fixedterm work arrangements reduces skill acquisition of high-skilled workers, holding back life-cycle wage growth by up to 16 percentage points after 15 years since labor market entry.

Suggested Citation

  • Laura Hospido & Jose Garcia-Louzao & Alessandro Ruggier, 2022. "Dual Returns to Experience," Bank of Lithuania Working Paper Series 102, Bank of Lithuania.
  • Handle: RePEc:lie:wpaper:102
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    More about this item

    Keywords

    labor market duality; human capital; earnings dynamics;
    All these keywords.

    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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