Why do Firms Use Fixed-Term Contracts?

Pedro Portugal () and Jose Varejao ()

Working Papers from Banco de Portugal, Economics and Research Department

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' decisions 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.

JEL-codes: J23 J41 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Why do firms use fixed-term contracts? (2022)
Working Paper: Why Do Firms Use Fixed-Term Contracts? (2009)
Working Paper: Why Do Firms Use Fixed-Term Contracts? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ptu:wpaper:w200308

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