THE IMPACT OF FIRM-LEVEL CONTRACTING ON WAGE LEVELS AND INEQUALITY: SPAIN 1995-2002 by Sara de la Rica (University of the Basque Country and IZA)

This paper examines the variations over time in collective bargaining in Spain and their e¤ect on wages by comparing the \u85rst two waves of a large matched employer-employee data set (Structure of Earnings Survey (EES-95 and EES-2002)). Using both wage determination models and counterfactual distributions we analize the changes over time in the wage premium associated with rm-level contracting from 1995 to 2002, as well as its impact on wage inequality. For men the rm contract wage premium decreased only slightly over this seven-year period but we \u85nd a larger drop in the average \u85rm contract wage premium for women. In regard to wage inequality, for men \u85rm contracts are found to reduce the variance of wages only in 1995 whereas for women the opposite e¤ect is observed in both periods. In addition to controls for individual, job and co-worker characteristics, we make use of the Spanish Structural Business Statistics (SBS) survey to add \u85nancial information at industry level. With this additional information, we improve the previous estimator of the propensity score and test the robustness of our \u85ndings. Finally, we nd no contribution of the observed centralization in collective agreements to the slight increase in wage dispersion in Spain over this seven-year period. 1