Sergio Puente

Modelling the impact of aging on social security expenditures

In this paper we survey the features of different approaches available in the literature used to study the effects of the aging of the population on Social Security expenditures. We comment on the weaknesses and strengths of each of them, and perform a quantitative analysis by comparing the results they imply in the particular case of the Spanish economy. Finally, we highlight some elements of the modelling strategies on which more evidence is needed for a correct evaluation of the problem at hand.

Business Demography in Spain: Determinants of Firm Survival

The impact of entry upon market performance depends not only on the number of entries and their size, but also on how long do the firms last. Consequently, there are an increasing number of papers, most of them focused on the United States and restricted to the manufacturing sector, aimed at analysing the post entry performance of firms. Unfortunately, there is not much about this important topic in Spain due to the lack of appropriate longitudinal micro data on firms. The current paper aims to fill this gap by means of a new database covering all sectors of the business economy constructed at the Bank of Spain. We study the determinants of new firm survival using non parametric and parametric procedures especially designed to analyse duration phenomena. We find that larger start ups survive longer and that the probability of exit is larger in sectors with high entry rates and low concentration. One of the contributions of the paper is the inclusion of the initial firms financial structure among the determinants of survival. Our results suggest that holding debt, instead of equity, has positive and important effects on survival up to some point. Beyond this point, further debt increments have a negative impact on survival, and this effect is more important the higher is the corresponding debt ratio or indebtness of the firm.

What Makes a High-Growth Firm? A Probit Analysis Using Spanish Firm-Level Data

Many studies have established that a small number of firms, known as fast-growth firms or Gazelles, create most of the new jobs. In spite of the importance of this topic from a policy-point of view, most of those studies are descriptive and limited to a comparison of the characteristics of the high-growth group with respect to a control group of firms. This paper, on the other hand, performs a multivariate analysis of the determinants of the fast growth of Spanish firms controlling for the possible endogeneity of some variables. We use for that purpose a firm-level database with information for about 200,000 Spanish firms per year between 1996 and 2003. We find that being a start-up increases the probability of fast growth by more than 30 percentage points, conditioned on having survived over the period. Firms with initial higher relative wages and debt ratio, up to a certain point, also experience higher chances of fast growth. Hence, as it was established elsewhere, better access to finance and to human capital are key to increase the number and growth of Gazelles. We also find that high-growth firm sustain their expansion with relatively more debt and fixed-term contracts than the rest of the firms in the sample.

The Schooling Response to a Sustained Increase in Low-Skill Wages: Evidence from Spain 1989-2009

The response of human capital accumulation to changes in the anticipated returns to schooling determines the type of skills supplied to the labor market, the productivity of future cohorts, and the evolution of inequality. Unlike the US, the UK or Germany, Spain has experienced since 1995 a drop in the returns to medium and tertiary education and, with a lag, a drop in schooling attainment of recent cohorts, providing the opportunity to estimate the response of different forms of human capital acquisition to relative increases in low-skill wages. We measure the expected returns to schooling using skill-specific wages bargained in collective agreements at the province-industry level. We argue that those wages are easily observable by youths and relatively insensitive to shifts in the supply of workers. Our preferred estimates suggest that a 10% increase in the ratio of wages of unskilled workers to the wages of mid-skill workers increases the fraction of males completing at most compulsory schooling by between 2 and 5 percentage points. The response is driven by males from less educated parents and comes at the expense of students from the academic high school track rather than the vocational training track.

Omitted Variables in the Measure of a Labour Quality Index: The Case of Spain

Traditional measures of labour quality might have the shortcoming of missing some features of the very important increase in labour utilization within European countries. In particular, we explore the case of Spain. Despite showing one of the most important increases in labour quality in the EU according to standard methods, it also offers a negative increase in TFP growth. This paper computes an index of labour quality in Spain between 1988 and 2006 using microdata from the Labour Force Survey and the Structural Earnings Survey-2002 that allows the introduction of all possible interactions in a semi-parametric fashion between gender, age, education, experience in the current job and nationality. Considering those observable characteristics, the index still shows a notable growth at an average annual rate of 0.42 pp. After a period of slight decline (between 1988 and 1992) the index grows continuously until 2006 when it fell again. This is the case because education is, even by considering all possible interactions with other demographic variables, the highest contributor to the quality index’s growth. However, the paper shows the importance of considering changes in average productivities of different socio-demographic groups over time. We include in the analysis two usually omitted variables that help explaining the recent productivity slowdown in Spain: type of occupation held by the individual and unobserved heterogeneity of workers. Both the inclusion of occupation and especially the entry of individuals with below-average productivity levels compared to precedent periods decrease the labour quality growth to an average annual rate of 0.20 pp. Indeed with the addition of these two factors labour quality slightly decreases from 1997 onwards.

Minimum Wages: Do They Really Hurt Young People?

This paper uses a significant increase in the minimum wage in Spain between 2004 and 2010 as a case study to analyse the effects on the individual probability of losing employment, using a large panel of social security records. We show that this individual approach is important, as the possible effects for different types of individuals may differ from other estimates in the literature, based on aggregate or firm-level data, hence complementing them. Our main finding is that older people experienced the largest increase in the probability of losing their job, when compared with other age groups, including young people. The intuition is simple: among the affected (low-productivity) workers, young people are expected to increase their productivity more than older ones, who are in the flat part of their life-cycle productivity curve. Consequently, an employer facing a uniform increase in the minimum wage may find it profitable to retain young employees and to fire older ones.

Firm productivity dynamics in Spain

We have constructed a new database aimed at the study of the relation between firm demography and labour productivity, with a large number of Spanish firms from both industry and service sectors. This database allows us to analyze in detail the degree of dispersion and persistence of productivity levels, as well as the contribution of firm demography to productivity growth. This analysis has been done at different levels of sector aggregation. We have also studied explicitly the differential role of small and large firms.

Dynamic Stability in Repeated Games

A concept of dynamic stability in infinitely repeated games with discounting is presented. For this purpose, one modification of the available theory is needed: we need to relax the assumption that the game starts in a given period. Under this new framework, we propose stable strategies such that a folk theorem with an additional stability requirement still holds. Under these strategies, convergence to the long run outcome is achieved in a finite number of periods, no matter what actions or deviations have been played in the past. Hence, we suggest a way in which a player can build up his reputation after a deviation.

Employment Generation by Small Firms in Spain

Despite the relevance in terms of policy, we still know little in Spain about where and by whom jobs are created, and how that is affecting the size distribution of firms. The main innovation of this paper is to use a rich database that overcomes the problems encountered by other firm-level studies to shed some light on the employment generation of small firms in Spain. We find that small firms contribute to employment disproportionately across all sectors of the economy although the difference between their employment and job creation share is largest in the manufacturing sector. The job creators in that sector are both new and established firms whereas only new small firms outperform their larger counterparts in the service sector. The large annual job creation of the small firm size class is shifting the firm size distribution towards the very small production units, although not uniformly across industries of different technology intensity.

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.