Accounting for Changes in the Spanish Wage Distribution: The Role of Employment Composition Effects

30 Pages Posted: 16 Sep 2011

See all articles by Raquel Carrasco

Raquel Carrasco

Universidad Carlos III de Madrid - Department of Economics; Centre for Economic Policy Research (CEPR)

Juan F. Jimeno

Banco de España - Research Department; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Ana Carolina Ortega Masague

Foundation for Applied Economic Research (FEDEA); Universidad de Alcala

Date Written: September 16, 2011

Abstract

Despite a rapid decrease in unemployment and strong GDP and employment growth, real wages barely increased in Spain over the period 1995-2006. An explanation of this lack of growth may rely on employment composition effects derived from structural changes, such as the rise in the weights of employment in the construction and services sectors, the increase in female employment participation, and the arrival of large immigration inflows. Using data from three waves of the Structure of Earnings Survey, we break down observed wage changes into those due to varying worker and job characteristics and variations of the returns to those characteristics. Quantile regressions are used to estimate wage equations at different percentiles and to construct the counterfactual wage distributions that would have been observed had individual and job characteristics remain constant over time. Our main finding is that the lack of growth of Spanish real wages over the period 1995-2006 is mainly due to the decrease of returns to characteristics, specially education and labor market experience, which is more noticeable at the upper deciles of the wage distribution, and not to changes in employment composition, which when taken over a wide set of worker and job characteristics, had positive effects on wages.

Keywords: wage structure, quantile regressions, composition effects

JEL Classification: J31, J21

Suggested Citation

Carrasco Perea, Raquel and Jimeno, Juan F. and Ortega Masague, Ana Carolina, Accounting for Changes in the Spanish Wage Distribution: The Role of Employment Composition Effects (September 16, 2011). Banco de Espana Working Paper No. 1120, Available at SSRN: https://ssrn.com/abstract=1928490 or http://dx.doi.org/10.2139/ssrn.1928490

Raquel Carrasco Perea (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34 91 624 9583 (Phone)
+34 91 624 9875 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Juan F. Jimeno

Banco de España - Research Department ( email )

Alcala 48
28014 Madrid
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Ana Carolina Ortega Masague

Foundation for Applied Economic Research (FEDEA) ( email )

Jorge Juan 46
Madrid, 28001
Spain
+34 914350401 (Phone)
+34 915779575 (Fax)

Universidad de Alcala

Plaza de San Diego s/n
E-28801 Madrid
Spain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
74
Abstract Views
1,690
rank
453,880
PlumX Metrics