Working Paper: CEPR ID: DP754
Authors: Juan J. Dolado; Samuel Bentolila
Abstract: This paper analyses the wage formation process in Spain taking into account the effect of the institutional change caused by the creation of low-firing-cost, fixed-term labour contracts. An insider-outsider model which assumes that the interests of workers under these contracts are disregarded in wage bargains is set up and tested. The estimation of a wage equation for a sample of large Spanish manufacturing firms yields an estimate of the insider weight and confirms that an increase in the proportion of fixed-term employees increases insiders' wages.
Keywords: insiders; outsiders; temporary labour contracts
JEL Codes: E42; J23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| low-firing-cost fixed-term contracts (M55) | two-tier labor market (J46) |
| insiders' wage demands (J31) | buffer effect (H60) |
| proportion of fixed-term employees (J63) | wage demands of permanent employees (J38) |
| proportion of fixed-term employees (J63) | growth rate of permanent workers' wages (J39) |
| proportion of fixed-term employees (J63) | insiders' bargaining power (L14) |