Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform

Pedro Martins

International Review of Law and Economics, 2021, vol. 68, issue C

Abstract: Fixed-term labour contracts (FTCs) may be an important tool to promote employment, particularly in recessions and when dismissal costs of open-ended contracts are high. In this case, making FTCs more flexible during downturns may be useful. We assess this idea by examining the effects of a law that increased the maximum duration of FTCs in Portugal during the 2012 recession. Our analysis is based on regression-discontinuity and difference-in-differences methods and employer-employee panel data. We find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Worker churning is reduced, as mobility of eligible fixed-term workers to other firms drops by 10%. Employment also increases but only for younger workers.

Keywords: Employment law; Worker mobility; Labour segmentation; Policy evaluation (search for similar items in EconPapers)
JEL-codes: J23 J41 J63 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform (2017)
Working Paper: Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform (2016)
Working Paper: Should the Maximum Duration of Fixed-Term Contracts Increase in Recessions? Evidence from a Law Reform (2016)
Working Paper: Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:68:y:2021:i:c:s0144818821000338

DOI: 10.1016/j.irle.2021.106009

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