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The Puzzling Fall of the Wage Skill Premium in Spain

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  • Florentino Felgueroso
  • Manuel Hidalgo-Pérez
  • Sergi Jiménez-Martín

Abstract

In contrast to most EU countries and other developed economies, the Wage Skill Premium (WSP) has been steadily falling over the past decades in Spain. The main purpose of this work is to document and explain the fall in the WSP in Spain over the past two decades using Social Security data. Our estimation procedure follows and extends Dustman and Meghir (2005), which allows us to estimate the returns to various sources of experience, as well as seniority, while controlling for the likely biases and endogeneity associated with these models. The results reveal that the fall in the WSP can be explained in part by an increase in the share of college graduates that are mismatched, that is, working in positions for which they are a priori overeducated. However, this phenomenon only partially explains the fall in the WSP: differences between high and low-educated workers in the returns to all types of experiences and tenure have been substantially reduced since the end of the 90s.
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Suggested Citation

  • Florentino Felgueroso & Manuel Hidalgo-Pérez & Sergi Jiménez-Martín, 2016. "The Puzzling Fall of the Wage Skill Premium in Spain," Manchester School, University of Manchester, vol. 84(3), pages 390-435, June.
    • Handle: RePEc:bla:manchs:v:84:y:2016:i:3:p:390-435
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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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