Luca Giangregorio (University of Roma Tre)
Giacomo Rella
This paper investigates the heterogeneous effects of restrictive monetary policy on labor market outcomes across the wage distribution in Spain. Exploiting administrative data from the Muestra Continua de Vidas Laborales over the period 20122019, linked with the high-frequency monetary policy shock indicator of Jaroci´nski and Karadi (2020), we document that contractionary monetary policy significantly increases wage inequality. Using local projections estimated at the individual level, we show that workers at the bottom of the earnings distribution bear a disproportionate share of the adjustment through wage losses, reductions in working hours, contractual downgrades from full- time to part-time, and persistent employment losses driven by both higher separation rates and lower job-finding rates. Workers in the upper half of the distribution remain largely unaffected. The absence of voluntary resignations and of reallocation across employers and sectors points to firm-level labor demand as the primary driver of these adjustments, with low-wage workers having little capacity to respond on the labor supply side.