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Why Do Firms Use Fixed-Term Contracts?

Jose Varejao () and Pedro Portugal

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: This paper investigates the reasons why firms use fixed-term contracts.Two distinctive features of these contracts - reduced firing costs and the prohibition of contract rollover - are highlighted. Firms' decision related to temporary contracts - the choice of the contract on offer and contract conversion - are modeled within standard adjustment costs and matching settings. Regression analysis is performed on the stock of fixed-term contracts and the flows of temporary workers to permanent positions. Results from a beta-binomial regression model indicate that screening workers for permanent positions is the single most important reason why firms use this type of contract.

Keywords: Fixed-Term Contracts; Adjustment Costs; Temporary Employment (search for similar items in EconPapers)
JEL-codes: J23 J41 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2003-06
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Related works:
Working Paper: Why Do Firms Use Fixed-Term Contracts? (2009) Downloads
Working Paper: Why do Firms Use Fixed-Term Contracts? (2003) Downloads
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