The Spanish Labor Market in a Cross-Country Perspective

January 1, 2011

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Format: Chicago

Florence Jaumotte. The Spanish Labor Market in a Cross-Country Perspective, (USA: International Monetary Fund, 2011) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The Spanish labor market is not working: the unemployment rate is structurally very high; wages are not very responsive to labor market conditions, causing a high cyclicality of unemployment; and the labor market is highly dual. Compared with the EU15, Spanish labor market institutions and policies stand out by the structure of its collective bargaining, which occurs mostly at an intermediate level, and by very high severance payments for permanent workers. Based on a quantitative analysis, the paper shows that moving away from the intermediate level of bargaining would go a long way toward bringing the unemployment rate closer to the EU15 average. The key reform needed to reduce the share of temporary workers is reducing employment protection of permanent workers. Substantially reforming the collective bargaining system and reducing the protection of permanent workers are likely to be highly complementary to secure a substantial reduction in the unemployment rate. The recent 2010 labor market reform attempts to address these issues, although its effects are still to materialize.

Subject: Commodity markets, Employment protection, Tax wedge, Unemployment benefits, Unemployment rate

Keywords: Equilibrium unemployment, Labor market, Share of temporary workers, Wage agreement, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/011
Stock No:

WPIEA2011011
ISBN:

9781455211890
ISSN:

1018-5941

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