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

Daniel Fernández-Kranz () and Núria Rodriguez-Planas
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Daniel Fernández-Kranz: IE Business School, Madrid
Authors registered in the RePEc Author Service: Daniel Fernandez Kranz

No 10597, IZA Discussion Papers from Institute of Labor Economics (IZA)

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; fixed-term and permanent contract; wage rigidity (search for similar items in EconPapers)
JEL-codes: E32 J22 J31 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2017-02
New Economics Papers: this item is included in nep-lma and nep-mac
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Published - published in: Industrial Labor Relations Review, 2018, 71 (2), 492-524

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