Asymmetric Labor Market Reforms: Effects on Wage Growth and Conversion Probability of Fixed-Term Contracts

Marta Silva, Luis Martins and Helena Lopes

ILR Review, 2018, vol. 71, issue 3, 760-788

Abstract: The authors investigate the impact of a change in employment protection laws in Portugal that increased the maximum legal duration of fixed-term contracts. They find that this reform led to a reduction in the probability that a worker on a fixed-term contract would be converted to a permanent contract. In addition, those workers who had their contracts converted experienced a significantly higher hourly wage growth at the time of conversion and faced a lower reduction in wage growth during the years in which the changed legislation was in force. Consequently, the implementation of this law led to a 27% increase in the wage-growth differential between the two contracts. The findings are based on an endogenous regime-switching model using rich administrative linked employer–employee data.

Keywords: employment protection legislation; fixed-term contract; endogenous regime-switching model (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:ilrrev:v:71:y:2018:i:3:p:760-788

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