Internship contracts and youth labour market outcomes: a causal evaluation of employment and wage effects

Purpose This study aims to evaluate the impact of Internship Contracts, a youth-targeted active labor market policy implemented in Spain between 2016 and 2019. Design/methodology/approach Using administrative data from the Continuous Sample of Working Lives and propensity score matching, the authors estimate the Average Treatment on the Treated (ATT) for contract duration and monthly wages in the short term (one year) and medium term (two to three years). Logistic models estimate the probability of obtaining a permanent contract and remaining with the same employer after contract completion. Findings Relative to Temporary Contracts (TCs), Internship Contracts lead to higher wages, longer subsequent contracts and a greater likelihood of permanent employment, although with lower employer retention. Internship contract holders earn on average €186,42 more than comparable TC holders over the 2017–2019 period, corresponding to an earnings premium of 14,7%. Effects are broadly consistent across subsamples, with heterogeneity by gender, experience and education. Originality/value The results reveal a paradox: the strongest benefits of Internship Contracts accrue to individuals with prior work experience, despite the programme’s objective of facilitating labor-market entry for first-time participants, with prior experience shaping both the magnitude and timing of these effects.