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The use of permanent contracts across Spanish regions: Do regional wage subsidies work?

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Listed:
  • Yolanda Rebollo Sanz

    () (Department of Economics, Universidad Pablo de Olavide)

  • Jose Ignacio García Pérez

    () (Department of Economics, Universidad Pablo de Olavide)

Abstract

This paper evaluates the effect of regional wage subsidies to foster permanent employment for a sample of temporary and unemployed Spanish workers. We study the transition into permanent employment using a new dataset based on administrative Social Security registers named “La Muestra Continua de Vidas Laborales”, which is used for the first time to carry out policy evaluation exercises in the Spanish labor market. This dataset offers important advantages with respect to the Labour Force Survey, given it offers the complete labor history of the worker. Moreover, since we have individual, regional and time variation in our policy measure, we can apply a difference-in-differences estimator to identify the average treatment effect of this policy. Though, these regional policies have been implemented for almost ten years, as far as we know, this is the first attempt to evaluate them. Our main results are that, in average terms, this policy has positive but small effects on the transition rate into permanent employment either from a temporary contract or from unemployment. The incidence of these subsidies, however, is larger when the worker is in a temporary contract. It is also larger for young females while for old male workers do not have any effect. Measured at the average wage subsidy (5100 Euros) the total change in the entrance probability from a temporary to a permanent contract is around 26% for young women, 24% for middle age ones and 22% for middle age men, the most benefited workers. Nevertheless, since the transition rates to permanent contracts at the same firm are pretty low these relative changes hardly generate a change in the transition probability from a temporary to a permanent contract at the same firm. For instance, in the case of young women the estimated transition probability growths from 0.064% to 0.075% while for middle age men it changes from 0.039% to 0.041%.

Suggested Citation

  • Yolanda Rebollo Sanz & Jose Ignacio García Pérez, 2007. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Working Papers 07.06, Universidad Pablo de Olavide, Department of Economics.
  • Handle: RePEc:pab:wpaper:07.06
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    1. Políticas activas de empleo: qué funciona y qué se consigue
      by Samuel Bentolila in Nada Es Gratis on 2013-11-12 12:55:33

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    Cited by:

    1. Inmaculada Garcia & Colin Green & Maria Navarro Paniagua, 2012. "New Estimates of the Effect of Temporary Employment on Absenteeism," Working Papers 24151321, Lancaster University Management School, Economics Department.
    2. Verónica Escudero, 2018. "Are active labour market policies effective in activating and integrating low-skilled individuals? An international comparison," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-26, December.
    3. J. Ignacio García-Pérez & Ioana Marinescu & Judit Vall Castello, 2014. "Can Fixed-Term Contracts Put Low Skilled Youth on a Better Career Path? Evidence from Spain," Working Papers 2014-08, FEDEA.
    4. Sergi JimeÌ nez-MartiÌ n & Arnau Juanmarti Mestres & Judit Vall Castello, 2017. "Hiring subsidies for people with disabilities: Do they work?," Policy Papers 2017-11, FEDEA.
    5. Fernández-Kranz, Daniel & Rodríguez-Planas, Núria, 2011. "The part-time pay penalty in a segmented labor market," Labour Economics, Elsevier, vol. 18(5), pages 591-606, October.
    6. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2012. "The New New Labour Market Reform in Spain: Objectives, Instruments, and Shortcomings," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(2), pages 03-07, 08.
    7. repec:ces:ifodic:v:10:y:2012:i:2:p:18946366 is not listed on IDEAS
    8. Yolanda Rebollo Sanz, 2009. "Landing a Permanent Contract: Do Job Interruptions and Employer Diversification Matter?," Working Papers 09.07, Universidad Pablo de Olavide, Department of Economics.
    9. Cueto, Begoña & Patricia, Suárez, 2014. "A review of active and passive labour market policies in Spain," MPRA Paper 60648, University Library of Munich, Germany.
    10. Cervini-Plá, María & Ramos, Xavier & Ignacio Silva, José, 2014. "Wage effects of non-wage labour costs," European Economic Review, Elsevier, vol. 72(C), pages 113-137.
    11. Ildefonso Mendez, 2013. "Promoting permanent employment: lessons from Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 4(2), pages 175-199, June.
    12. Inmaculada Cebrián & Gloria Moreno & Luis Toharia, 2011. "La estabilidad laboral y los programas de fomento de la contratación indefinida," Hacienda Pública Española, IEF, vol. 198(3), pages 103-127, September.
    13. Yolanda Rebollo Sanz & J. Ignacio García-Pérez, 2009. "Do wage subsidies affect the subsequent employment stability of permanent workers?: the case of Spain," Working Papers 09.18, Universidad Pablo de Olavide, Department of Economics.
    14. Vall Castello, Judit, 2012. "Promoting employment of disabled women in Spain; Evaluating a policy," Labour Economics, Elsevier, vol. 19(1), pages 82-91.
    15. Stefano Visintin & Alessandro Gentile, 2013. "Il mercato del lavoro in spagna: criticità e riforme strutturali in un contesto di crisi economica," ECONOMIA E SOCIETÀ REGIONALE, FrancoAngeli Editore, vol. 2013(2), pages 65-85.
    16. Sergi Jiménez Martín & Judit Vall Castello, 2009. "Business Cycle Effects on Labour Force Transitions for Older People in Spain," Working Papers 2009-25, FEDEA.
    17. J. Ignacio García‐Pérez & Fernando Muñoz‐Bullón, 2011. "Transitions into Permanent Employment in Spain: An Empirical Analysis for Young Workers," British Journal of Industrial Relations, London School of Economics, vol. 49(1), pages 103-143, March.
    18. Victoria Osuna & Jose-Ignacio García-Pérez, 2012. "The effects of introducing a single open-ended contract in Spain," EcoMod2012 3825, EcoMod.
    19. Fernández-Kranz, Daniel & Lacuesta, Aitor & Rodríguez-Planas, Núria, 2010. "Chutes and Ladders: Dual Tracks and the Motherhood Dip," IZA Discussion Papers 5403, Institute for the Study of Labor (IZA).
    20. Cristina Barceló & Ernesto Villanueva, 2010. "The response of household wealth to the risk of losing the job: evidence from differences in firing costs," Working Papers 1002, Banco de España;Working Papers Homepage.
    21. Ignacio García Pérez, J. & Osuna, Victoria, 2014. "Dual labour markets and the tenure distribution: Reducing severance pay or introducing a single contract," Labour Economics, Elsevier, vol. 29(C), pages 1-13.
    22. Mario García-Ferreira & Ernesto Villanueva, 2007. "Employment risk and household formation: evidence from differences in firing costs," Working Papers 0737, Banco de España;Working Papers Homepage.

    More about this item

    Keywords

    Difference-in-Differences; Evaluation Analysis; Wage Subsidies; Competing Riks;

    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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