A Comparative Study of The Portuguese and Spanish Labour Markets

Pedro Portugal () and Olympia Bover ()
Authors registered in the RePEc Author Service: Pilar García Perea ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: Spain faces the highest unemployment rate among the European Union countries (22.2%), and Portugal one of the lowest (7.3%). However, superficially, these two countries share common labour market features: they both have the most stringent job security rules in the OECD, the architecture of their bargaining systems appears identical, and the generosity of their unemployment insurance systems seems, after 1989, roughly comparable. In this paper we address this puzzle by providing a systematic comparison of the Portuguese and Spanish labour markets. We find that, at a closer look, there are differences in unemployment benefits (non-existent in Portugal until 1985, and less generous nowadays, with the replacement ratio as a percentage of much lower wage level in Portugal), differences in wage flexibility (minimum wages by category established by collective agreements are set at a lower relative level in Portugal, giving employers more room for manoeuvre than in Spain), and, in practice higher firing costs in Spain. We conclude that a key factor in explaining the difference in Portuguese and Spanish unemployment rates since the late seventies is the wage adjustment process. In turn, the wage adjustment in the two countries may have been influenced by the unemployment benefit system and, to a lesser extent, by the degree of job protection.

JEL-codes: J31 J51 J65 (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: A Comparative Study of the Portuguese and Spanish Labour Markets (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w199801

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