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How are fixed-term contracts used by firms? An analysis using gross job and worker flows

Catalina Amuedo-Dorantes () and Miguel Malo ()

A chapter in Work, Earnings and Other Aspects of the Employment Relation, 2008, vol. 28, pp 277-304 from Emerald Publishing Ltd

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.

Date: 2008
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