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Why Do Firms Use Fixed-Term Contracts?

Pedro Portugal and Jose Varejao ()

No 4380, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Temporary forms of employment account for a variable but never trivial share of total employment in both the U.S. and in Europe. In this article we look at how one specific form of temporary employment ? employment with fixed-term contracts ? fits into employers' hiring policies. We find that human capital variables (schooling, skills and employer-provided training) as measured at the levels of the worker and the workplace are important determinants of the employers’ decisions to hire with fixed-term contracts and to promote temporary workers to permanent positions. Those employers that hire more with fixed-term contracts are also those that are more likely to offer a permanent position to their newly-hired temporary employees. Our results indicate that fixed-term contracts are used as mechanisms for screening workers for permanent positions.

Keywords: fixed-term contracts; adjustment costs; labor demand (search for similar items in EconPapers)
JEL-codes: J23 J41 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2009-08
New Economics Papers: this item is included in nep-bec, nep-hrm and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47) Track citations by RSS feed

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Related works:
Working Paper: Why Do Firms Use Fixed-Term Contracts? (2003) Downloads
Working Paper: Why do Firms Use Fixed-Term Contracts? (2003) Downloads
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