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Real wage responsiveness to unemployment in Spain: asymmetries along the business cycle

Paulino Font (), Mario Izquierdo () and Sergio Puente

IZA Journal of European Labor Studies, 2015, vol. 4, issue 1, 1-13

Abstract: We estimate real wage cyclicality in the period compressed between 1987 and 2013 using a large administrative dataset of workers in Spain. Real wages are weakly procyclical in Spain and focusing on differences in different phases of the business cycle, we find that differences across expansions and recessions are significant, with an even lower real wage cyclicality in recessions. Furthermore, higher levels of unemployment do not translate into additional real wages adjustments when the economy is contracting, while lower levels of unemployment during expansions have incremental effects on wage elasticity. This general result holds after accounting for differences in tenure, type of contract and age categories. Nevertheless, wages of newly-hired workers are the most sensitive to the business cycle and exhibit the lowest asymmetric pattern between expansions and recessions. At the other end, wages of workers with more than six years of tenure can be characterized as the most protected against economic downturns. The same is true for fixed-term vs. permanent workers, as well as for young vs. older workers. JEL classification: e32, j31 Copyright Font et al.; licensee Springer. 2015

Keywords: Wage cyclicality; Downward wage rigidity; Social security data (search for similar items in EconPapers)
Date: 2015
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DOI: 10.1186/s40174-015-0038-x

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