The Perfect Storm: Graduating in a Recession in a Segmented Labor Market

46 Pages Posted: 11 Mar 2017

See all articles by Daniel Fernández-Kranz

Daniel Fernández-Kranz

IE Business School

Núria Rodríguez-Planas

City University New York (CUNY), Queens College; IZA Institute of Labor Economics

Abstract

This paper analyzes the effects of entry labor-market conditions on workers' career in Spain, a country well known for its highly segmented labor market and rigid labor-market institutions. In contrast with more flexible labor markets, we find that the annual earnings losses of individuals without a university degree are greater and more persistent than those of college graduates. For workers without a college degree, the effect is driven by a lower likelihood of employment. For college graduates, the negative impact on earnings is driven by both a higher probability of non-employment, and employment in jobs with fixed-term contracts. While a negative shock increases mobility of college graduates across firms and industries, there is no earnings recovery, just secondary labor-market job churning. Our results are consistent with tight regulations of the Spanish labor market such as binding minimum wages and downward wage rigidity caused by collective bargaining agreements.

Keywords: full and dynamic effect of poor labor market conditions at entry, wage rigidity, fixed-term and permanent contract

JEL Classification: E32, J22, J31

Suggested Citation

Fernandez-Kranz, Daniel and Rodriguez-Planas, Nuria, The Perfect Storm: Graduating in a Recession in a Segmented Labor Market. IZA Discussion Paper No. 10597, Available at SSRN: https://ssrn.com/abstract=2931334

Daniel Fernandez-Kranz (Contact Author)

IE Business School ( email )

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Spain
(0034) 915689600 (Phone)

Nuria Rodriguez-Planas

City University New York (CUNY), Queens College ( email )

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United States

HOME PAGE: http://https://sites.google.com/site/nuriarodriguezplanas/

IZA Institute of Labor Economics

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