Mario Izquierdo

Price, Wage and Employment Response to Shocks: Evidence from the WDN Survey

This paper analyses information from survey data collected in the framework of the Eurosystem�s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend - in theoretically sensible ways - on the intensity of competition in firms� product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass through stronger.

Assimilation of immigrants in Spain: a longitudinal analysis

In this paper we use the Continuous Sample of Working Histories 2005 (MCVL2005) to analyze the earnings assimilation of migrants from outside the EU-15 in Spain. Using our panel dataset we show that immigrants reduce around the half of the initial wage gap respect to natives the first 5 to 6 years after arrival. However, no further reductions of the remaining wage gap are estimated. We also show that results based on cross-section data are downward biased since an important increase in the quality of migrants has taken place over the recent years. This skill upgrading of new immigrant cohorts is evident in the Spanish case as well as the depreciation of the value of most of the experience that is brought from abroad. We can associate the improvement in the skill of immigrants to a change in the composition of new entrants. An important mechanism underlying the assimilation is the higher likelihood of recent immigrants in changing jobs among different sectors and firms, but also improving their situation within the same firm. Finally, some caveats should be taken into account when interpreting our results given that immigration phenomenon is quite recent in the Spanish labour market and it has taken place in an especially positive economic environment.

Spain: From Immigration to Emigration?

Since the start of the Great Recession the unemployment rate in Spain has risen by almost 18 percentage points. The unemployment crisis is affecting all population groups, including the more highly educated; but it is even more acute for the foreign population, whose unemployment rate is close to 40%. This situation follows a period of very high immigration flows (1995-2007) that set the number of foreigners living in Spain at 11% of the population. This paper documents the characteristics of recent migration flows to Spain and compares how foreign and Spanish nationals are moving abroad and across Spanish regions in response to the unemployment crisis. Building on this comparison, we shed some light on the selection of migrants by educational level and offer conjecture as to the implications of the migration outflows observed in recent years.

Local responses to a global monetary policy: The regional structure of financial systems

This paper contrasts the different regional effects of an homogeneous monetary policy, and studies the local characteristics that underlie these differential responses. To this purpose, we use Spanish regional data and estimate a vector autoregression (VAR) model using seemingly unrelated regression (SUR) techniques to characterise regional responses. Results provide evidence of statistically different regional responses of real variables to monetary policy shocks. We use these estimated responses to analyse if they depend on regional characteristics. Results show that manufacturing sectors, a negative financial position, as well as the degree of nominal wage indexation, enhance the effect of monetary policy.

The Laspeyres bias in the Spanish consumer price index

The CPI compares the cost of acquiring a reference quantity vector at current and base prices. Such reference vector is the vector of mean quantities actually bought by a reference population, whose consumption patterns are investigated during a period τ prior to the index base period 0. This paper shows that unless the price change between these two dates is taken into account, the CPI ceases to be a proper statistical price index of the Laspeyres type. Among several negative consequences, the most important is that this omission produces a bias in the measurement of inflation: the ‘Laspeyres bias’. Using Spanish data, the size of the Laspeyres bias is estimated at -0.061% per year, during 1992–1998. The Laspeyres bias in shorter time periods reached -0.122% per year in 1992, and -0.108 in 1997.

Distributional aspects of the quality change bias in the CPI: evidence from Spain

Abstract This paper shows that the richer households are significantly more affected by the quality-change bias (QCB) in the CPI. The empirical analysis combines the detailed information pertaining to the size of the QCB for the US with household-specific CPIs for Spain.

The Plutocratic Bias in the CPI; Evidence from Spain

We define the plutocratic bias as the difference between inflation measured according to the current official CPI and a democratic index in which all households receive the same weight. We estimate that during the 1990s the plutocratic bias in Spain amounts to 0.055 percent per year. However, positive and negative biases cancel off when averaging over the whole period. The mean absolute bias is significantly larger, 0.090. We can explain most of the oscillations experimented by the plutocratic bias by the price behavior of three goods: a luxury good and two necessities.

Employment, Wage and Price Reactions to the Crisis in Spain: Firm-Level Evidence from the WDN Survey

This paper describes the main results from the third wave of the Wage Dynamics Network (WDN) survey. Its main goal is to provide information on demand, finance conditions and other factors determining economic activity, on wage, price and employment adjustments over the period 2010-2013, and on firms’ perceptions of institutional changes in the labour market. In Spain, the survey was conducted at the end of 2014, collecting information from a representative sample of 1,975 Spanish firms covering manufacturing, energy and market services sectors. The main results show that Spanish firms’ adjustment to falling demand and other negative conditions since 2010 relied heavily on the dismissal of employees under temporary contracts, although those firms most affected by the crisis also significantly reduced permanent employment. On the contrary, wage and hours adjustments remained limited even in those firms most severely affected by the negative shocks. Regarding institutional changes, Spanish firms perceive some easing in the conditions for economic layoffs, attributing the main source of this higher flexibility to legal changes since 2010. As to other labour conditions, including wages and hours, the share of firms perceiving higher flexibility is somewhat lower.

Subsidising Mature Age Employment or Throwing Coins into a Wishing Well: A Quasi-Experimental Analysis

Este articulo evalua los efectos que los subsidios al mantenimiento del empleo hayan podido tener sobre la probabilidad de que los trabajadores con mayor edad permanezcan en su empresa. Mediante la implementacion de un diseno cuasiexperimental, propiciado por cambios en la regulacion laboral en Espana, podemos estimar que la eliminacion del subsidio tuvo un efecto pequeno, pero significativo, en la continuidad del trabajador en su empresa. Nuestros resultados muestran que 1 pp de incremento en el coste del trabajador se traduce en 0,11 pp de mayor probabilidad de que el trabajador abandone la empresa en los proximos cinco meses. Este efecto estuvo principalmente causado por los trabajadores de menor antiguedad en la empresa, que a su vez presentan menores costes de despido, y por trabajadores de baja cualificacion, para los que parece que la brecha salario-productividad empeora mas con la edad. En terminos de analisis coste-beneficio, documentamos que el mencionado mayor mantenimiento del empleo se consiguio a un coste desproporcionado, por lo que la eliminacion del subsidio supuso una ganancia de eficiencia en la Seguridad Social.

Labour market adjustment in Europe during the crisis: microeconomic evidence from the wage dynamics network survey

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.