The Schooling Response to a Sustained Increase in Low-Skill Wages: Evidence from Spain 1989-2009

51 Pages Posted: 13 Feb 2012

See all articles by Aitor Lacuesta

Aitor Lacuesta

Banco de España

Sergio Puente

Banco de España

Ernesto Villanueva

Banco de España - Research Department

Date Written: February 13, 2012

Abstract

The response of human capital accumulation to changes in the anticipated returns to schooling determines the type of skills supplied to the labor market, the productivity of future cohorts, and the evolution of inequality. Unlike the US, the UK or Germany, Spain has experienced since 1995 a drop in the returns to medium and tertiary education and, with a lag, a drop in schooling attainment of recent cohorts, providing the opportunity to estimate the response of different forms of human capital acquisition to relative increases in low-skill wages. We measure the expected returns to schooling using skill-specific wages bargained in collective agreements at the province-industry level. We argue that those wages are easily observable by youths and relatively insensitive to shifts in the supply of workers. Our preferred estimates suggest that a 10% increase in the ratio of wages of unskilled workers to the wages of mid-skill workers increases the fraction of males completing at most compulsory schooling by between 2 and 5 percentage points. The response is driven by males from less educated parents and comes at the expense of students from the academic high school track rather than the vocational training track.

Keywords: collective bargaining, human capital

JEL Classification: J52, J24

Suggested Citation

Lacuesta, Aitor and Puente, Sergio and Villanueva, Ernesto, The Schooling Response to a Sustained Increase in Low-Skill Wages: Evidence from Spain 1989-2009 (February 13, 2012). Banco de Espana Working Paper No. 1208. Available at SSRN: https://ssrn.com/abstract=2004232 or http://dx.doi.org/10.2139/ssrn.2004232

Aitor Lacuesta (Contact Author)

Banco de España ( email )

Madrid 28014
Spain

Sergio Puente

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Ernesto Villanueva

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

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