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Labour demand, flexible contracts and financial factors: new evidence from Spain

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  • Andrew Benito

    ()
    (Banco de España)

  • Ignacio Hernando

    ()
    (Banco de España)

Abstract

We estimate models of labour demand for a panel of 3,400 Spanish manufacturing firms over the period 1985-2001. We examine the roles of flexible labour through temporary contracts, financial factors and a policy reform in 1997 affecting permanent contracts by lowering payroll taxes and dismissal costs. Compared to permanent employment, the demand for flexible labour displays (i) greater sensiti vity to financial factors (ii) greater cyclical sensitivity (iii) a larger average wage elasticity (iv) less inertia. Our analysis of the 1997 policy reform finds an effect of payroll taxes on employment. A 5 percentage point reduction in the payroll tax increases labour demand by 8 per cent.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0312e.pdf
File Function: First version, September 2003
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0312.

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Length: 40 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:bde:wpaper:0312

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Related research

Keywords: labour demand; financial pressure; temporary contracts;

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References

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  1. Stephen Nickell & D Nicolitsas, 1995. "How Does Financial Pressure Affect Firms?," CEP Discussion Papers dp0266, Centre for Economic Performance, LSE.
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Cited by:
  1. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed-term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
  2. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 37-43, 04.
  3. Gatti, Donatella & Vaubourg, Anne-Gaël, 2009. "Unemployment and Finance: How Do Financial and Labour Market Factors Interact?," IZA Discussion Papers 4075, Institute for the Study of Labor (IZA).
  4. cipollone piero & Anita Guelfi, 2006. "The value of flexible contracts; evidence from an italian panel of industrial firms," Temi di discussione (Economic working papers) 583, Bank of Italy, Economic Research and International Relations Area.
  5. repec:hal:wpaper:halshs-00566792 is not listed on IDEAS

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