Polarization and the growth of low-skill service jobs in Spanish local labor markets

This paper analyzes the long-term transformations of the occupational structure in 50 provinces of Spain with a view to ascertain the existence and assess the extent of employment polarization. The peculiar characteristics of this country, namely rigid labor markets and the relatively recent transition to democracy, make for an interesting addition to existing studies on this topic. In line with previous literature on other countries, we find a strong association between the decline of “routine” mid-skill jobs and the expansion of low-skill service employment as well as differential labor market outcomes by levels of formal education. Results are robust to various controls and instrumental variables that account for long-term industry specialization. We also find a positive local multiplier effect of high-skilled workers on the demand for nontradable service jobs.