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A Note on Changes in the Wage and Unemployment Structures in Spain - Evidence from the Luxembourg Income Study


  • Patrick A. Puhani



This note tests whether the extraordinary rise in Spanish unemployment in the 1980s can be traced back to rigidities in the wage structure in the face of relative net demand shocks against the unskilled (this claim is also known as the ‘Krugman hypothesis’). I can establish that youth joblessness is key to the Spanish unemployment problem, but sampling procedures in the data set make it impossible to track the youth unemployment problem across time in a satisfactory way. Even though high youth unemployment is consistent with the Krugman hypothesis, substantial skill upgrading of the Spanish labour force in the1980s explains why the low education groups did not experience an increase in relative unemployment.

Suggested Citation

  • Patrick A. Puhani, 2002. "A Note on Changes in the Wage and Unemployment Structures in Spain - Evidence from the Luxembourg Income Study," University of St. Gallen Department of Economics working paper series 2002 2002-27, Department of Economics, University of St. Gallen.
  • Handle: RePEc:usg:dp2002:2002-27

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    References listed on IDEAS

    1. John P. Haisken-DeNew & Christoph M. Schmidt, 2000. "Interindustry and Interregion Differentials: Mechanics and Interpretation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 516-521, August.
    2. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, "undated". "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
    3. Puhani, Patrick A., 2002. "Relative wage and unemployment changes in Poland: microeconometric evidence," Economic Systems, Elsevier, vol. 26(2), pages 99-126, June.
    4. Puhani, Patrick A., 2001. "Wage Rigidities in Western Germany? Microeconometric Evidence from the 1990s," IZA Discussion Papers 334, Institute for the Study of Labor (IZA).
    5. Daron Acemoglu, 2002. "Technical Change, Inequality, and the Labor Market," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 7-72, March.
    6. Goerlich, Francisco J & Mas, Matilde, 2001. "Inequality in Spain 1973-91: Contribution to a Regional Database," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 47(3), pages 361-378, September.
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    earnings; rigidity;

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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