Financing constraints and fixed-term employment contracts

Andrea Caggese and Vicente Cuñat

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: This paper studies the interactions between financing constraints and the employment decisions of firms when both fixed-term and permanent employment contracts are available. We first develop a dynamic model that shows the effects of financing constraints and firing costs on employment decisions. Once calibrated, the model shows that financially constrained firms tend to use more intensely fixed term workers, and to make them absorb a larger fraction of the total employment volatility than financially unconstrained firms do. We test and confirm the predictions of the model on a unique panel data of Italian manufacturing firms with detailed information about the type of workers employed by the firms and about firm financing constraints.

Keywords: Finacing Constraints; Employment; Fixed-Term Contracts (search for similar items in EconPapers)
JEL-codes: G32 J21 J23 (search for similar items in EconPapers)
Date: 2006-06
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Financing Constraints and Fixed-term Employment Contracts (2008)
Journal Article: Financing Constraints and Fixed‐term Employment Contracts (2008)
Working Paper: Financing Constraints and Fixed-Term Employment Contracts (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1010

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