Skills and Human Capital in Eighteenth‐century Spain: Wages and Working Lives in the Construction of the Royal Palace of Madrid (1737–1805)

Abstract: Using a database of about 375,000 individual observations, which represent over two million days worked, this article studies building workers’ remunerations and how labour markets functioned in eighteenth-century Madrid. We present new wage series that correct and improve the evidence existing in the literature and provide an explanation for the long-run wage stickiness found in the city. Economic factors, rather than customs or guild regulations, explain why wage rates remained unaltered for about 100 years. The reconstruction of the working lives of 100 of the workers who took part in the construction of the Royal Palace of Madrid provides the first evidence of wage profiles for pre-industrial times. They demonstrate that every wage rate was attached to a certain level of skill. Craftsmen's wages increased as they gained abilities, as human capital theory predicts, while returns to age or experience were negligible in the case of unskilled workers. This points to the existence of segmented labour markets in the building sector in early modern Spain.