Explaining Youth Labor Market Problems in Spain: Crowding-Out, Institutions, or Technology Shifts?

This paper examines the empirical evidence regarding the poor performance of the youth labor market in Spain over the last two decades, which entails very high unemployment for both higher and lower educated workers, symptoms of over-education, and low intensity of on-the-job training. It also presents a simple matching model with two types of workers ("educated" and "non-educated") and two types of jobs ("skilled" and "unskilled"), under which educated workers may crowd-out non-educated workers from their traditional entry jobs, showing that a combination of an increase in the relative supply of higher educated worker and rigid labor market institutions harms the training and labor market prospects of lower educated workers, while it raises the proportion of higher educated workers performing low-skill jobs.