How Are Fixed-term Contracts Used by Firms? An Analysis Using Gross Job and Worker Flows

Amuedo-Dorantes, Catalina () and Miguel A. Malo ()
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Amuedo-Dorantes, Catalina: Department of Economics, San Diego State University

No 26, Working Papers from San Diego State University, Department of Economics

Abstract: Using Spanish establishment level data on temporary and permanent job and worker flows, we examine firms’ relative usage of fixed-term contracts in response to changes in their prior net employment expectations for the short-run and the long-run –viewed as proxies of how a wide variety of future shocks are ultimately perceived by establishments. The employment response of establishments to changing net employment expectations for the short-run is, primarily, suggestive of their reliance on fixed-term contracts as a buffer to cushion short-run changes in demand as well as to shield permanent workers from downward workforce adjustments. In contrast, their response to changes in net employment expectations for the long-run mostly hints on the use of fixed-term contracts as a screening device. Therefore, policies providing financial incentives to convert fixed-term into permanent contracts –thus targeting firms’ using fixed-term contracts as a screening device, are likely to only have limited effectiveness.

New Economics Papers: this item is included in nep-bec and nep-lab
Date: Written 2007-08
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