Fixed-term contracts and firm productivity: Do workers’ skills and firm conversion rates from fixed-term to permanent contracts matter?

Ngoc Hân Nguyen, Wendy Smits and Mark Vancauteren

International Journal of Manpower, 2024, vol. 45, issue 10, 144-161

Abstract: Purpose - We aim to elucidate the relationship between fixed-term employment and firm productivity by examining workers’ skills and considering how firm-level conversion rates influence this relationship. Design/methodology/approach - We use longitudinal employer-employee data between 2011 and 2017 in the Netherlands to estimate a nonlinear regression derived from a production function proposed by Addessi (2014) and Castellaniet al. (2020). Findings - The contribution of fixed-term contracts to firm-level productivity is less than that of permanent contracts. However, this contribution is greater when firms exhibit a high conversion rate from fixed-term to permanent positions. The effect of the conversion rate is more substantial for high-skilled fixed-term workers than for low-skilled ones. Originality/value - Our results suggest the extent to which firms benefit from fixed-term contracts when these are used for screening high-skilled workers for permanent employment.

Keywords: Productivity; Firm-level TFP; Labour contracts; Screening; Conversion rate; Worker skills; Panel data (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmpps:ijm-03-2024-0194

DOI: 10.1108/IJM-03-2024-0194

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