The Cost of Flexibility at the Margin. Comparing the Wage Penalty for Fixed-term Contracts in Germany and Spain using Quantile Regression

Abstract

Germany and Spain are typically regarded as 'rigid' economies, yet both have had different experiences of fixed-term jobs. Using quantile regression we find that in West Germany the earnings of permanent and fixed-term workers are most similar among high earners and most dissimilar among low earners. In Spain, the wage penalty shows little variation across the distribution of wages. This pattern was also found for different occupational groups, although there are clear differences in the absolute wage penalty across occupations. In conclusion we caution against generalizing findings from Spain to other 'rigid' European labour markets. Copyright 2007 The Authors. Journal compilation CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd. 2007.