Who are the insiders? : wage setting in Spanish manufacturing firms

Abstract

This paper analyzes 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 labor 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