DP754 Who Are the Insiders? Wage Setting in Spanish Manufacturing Firms

Author(s): Samuel Bentolila, Juan J. Dolado
Publication Date: January 1993
Keyword(s): Insiders, Outsiders, Temporary Labour Contracts
JEL(s): E42, J23
Programme Areas: Human Resources
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=754

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.