Earnings Effects of Permanent Employment Promoting Reforms: Analysis of the 1997 Labour Market Reform in Spain

Temporary employment accounts in Spain for about one third of total salaried employment since the mid-Eighties, which triples European figures. In the Nineties, two labour market reforms were implemented in an attempt to reduce the very high incidence of temporary employment, achieving some positive effects on employment. However, we still have a very limited knowledge of the likely effects on earnings. Since the reform applied only to certain age groups, in this paper we use a natural experiment research design to assess the impact of the 1997 reform on earnings levels. Using data on the Spanish component of the ECHP, we find positive effects on earnings of young men signing new contracts from unemployment.