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Do Temprary Contracts Affect TFP? Evidence from Spanish Manufacturing Firms

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  • Dolado, Juan J.
  • Stucchi, Rodolfo

Abstract

This paper evaluates the impact of the widespread use of fixed-term contracts in Spain on firms' TFP, via its effect on workers' effort. We propose a simple analytical framework showing that, under plausible conditions, workers' effort depends positively on their perception (for given level of effort) about firms' willingness to convert fixed-term contracts into permanent ones. We test this implication using manufacturing firm level data from 1991 to 2005 by means of nonparametric tests of stochastic dominance and parametric multivariate regression approaches. Our main findings are that high conversion rates increase firm's productivity while high shares of temporary contracts decrease it. Both effects are quantitatively relevant.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7055.

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Date of creation: Nov 2008
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Handle: RePEc:cpr:ceprdp:7055

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Keywords: firms' TFP; temporary workers; workers' effort;

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  1. Ichino, Andrea & Riphahn, Regina T., 2001. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," IZA Discussion Papers 385, Institute for the Study of Labor (IZA).
  2. Alvaro Escribano & Rodolfo Stucchi, 2008. "Catching up in total factor productivity through the business cycle : evidence from Spanish manufacturing surveys," Economics Working Papers we085125, Universidad Carlos III, Departamento de Economía.
  3. Maia Güell & Barbara Petrongolo, 2003. "How Binding are Legal Limits? Transitions from Termporary to Permanent Work in Spain," Working Papers 75, Barcelona Graduate School of Economics.
  4. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan Francisco, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers 2884, C.E.P.R. Discussion Papers.
  5. de la Rica, Sara & Dolado, Juan J. & Llorens, Vanesa, 2005. "Ceiling and Floors: Gender Wage Gaps by Education in Spain," IZA Discussion Papers 1483, Institute for the Study of Labor (IZA).
  6. Engellandt, Axel & Riphahn, Regina T., 2003. "Temporary Contracts and Employee Effort," IZA Discussion Papers 780, Institute for the Study of Labor (IZA).
  7. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR & CES & MSH, vol. 24, pages 349-402, 04.
  8. Cahuc, Pierre & Postel-Vinay, Fabien, 2002. "Temporary jobs, employment protection and labor market performance," Labour Economics, Elsevier, vol. 9(1), pages 63-91, February.
  9. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
  10. Delgado, Miguel A. & Farinas, Jose C. & Ruano, Sonia, 2002. "Firm productivity and export markets: a non-parametric approach," Journal of International Economics, Elsevier, vol. 57(2), pages 397-422, August.
  11. Catalina Amuedo-Dorantes, 2000. "Work transitions into and out of involuntary temporary employment in a segmented market: Evidence from Spain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(2), pages 309-325, January.
  12. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, 06.
  13. JosÈ C. FariÒas & Sonia Ruano, 2004. "The Dynamics of Productivity: A Decompostion Approach Using Distribution Functions," Small Business Economics, Springer, vol. 22(3_4), pages 237-251, 04.
  14. Rosario Sanchez & Luis Toharia, 2000. "Temporary workers and productivity: the case of Spain," Applied Economics, Taylor & Francis Journals, vol. 32(5), pages 583-591.
  15. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. La otra cara de la precariedad laboral en América Latina
    by Carmen Pages-Serra in Foco Económico on 2011-09-27 12:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Ferrari, Filippo, 2011. "Lo sviluppo delle competenze nei contesti precari
    [Skills development in precariousness: the dark side of flexibility?]
    ," MPRA Paper 33284, University Library of Munich, Germany.
  2. Kahn, Lawrence M., 2009. "Temporary Jobs and Job Search Effort in Europe," IZA Discussion Papers 4020, Institute for the Study of Labor (IZA).
  3. José Ignacio Conde Ruiz & Florentino Felgueroso & Jose Ignacio García Pérez, 2011. "Reforma Laboral 2010: Una primera evaluación y propuestas de mejora," Economic Reports 01-2011, FEDEA.
  4. Grassi, Emanuele & Di Cintio, Marco, 2012. "Uncertainty, flexible labour relations and R&D expenditure," MPRA Paper 37646, University Library of Munich, Germany.
  5. González, Xulia & Miles-Touya, Daniel, 2012. "Labor market rigidities and economic efficiency: Evidence from Spain," Labour Economics, Elsevier, vol. 19(6), pages 833-845.
  6. Conde Ruiz, José Ignacio. & Felgueroso, Florentino. & García Pérez, Jose Ignacio., 2011. "El fondo de capitalización a la austriaca: costes y beneficios de su implantación en España," Economic Reports 06-2011, FEDEA.
  7. Sophia Lee, 2013. "Examining policy configurations as conditions for long-term unemployment and non-standard employment in OECD countries using fuzzy-set analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 47(6), pages 3521-3536, October.
  8. J. Ignacio García Pérez & Victoria Osuna, 2012. "Dual Labour Markets and the Tenure Distribution: Reducing Severance Pay or Introducing a Single Contract?," Working Papers 2012-09, FEDEA.
  9. Nicodemo, Catia, 2013. "Immigration and Labor Productivity: New Empirical Evidence for Spain," IZA Discussion Papers 7297, Institute for the Study of Labor (IZA).
  10. Rebollo-Sanz, Yolanda, 2012. "Unemployment insurance and job turnover in Spain," Labour Economics, Elsevier, vol. 19(3), pages 403-426.
  11. Lorenzo Cappellari & Carlo Dell'Aringa & Marco Leonardi, 2011. "Temporary Employment, Job Flows and Productivity: A Tale of two Reforms," CESifo Working Paper Series 3520, CESifo Group Munich.
  12. Martin, John P. & Scarpetta, Stefano, 2011. "Setting It Right: Employment Protection, Labour Reallocation and Productivity," IZA Policy Papers 27, Institute for the Study of Labor (IZA).
  13. Aparicio Fenoll, Ainhoa, 2011. "The Effect of Product Market Competition on Job Instability," IZA Discussion Papers 5669, Institute for the Study of Labor (IZA).
  14. Paloma Lopez-Garcia & Sergio Puente, 2012. "What makes a high-growth firm? A dynamic probit analysis using Spanish firm-level data," Small Business Economics, Springer, vol. 39(4), pages 1029-1041, November.
  15. Addessi, William, 2014. "The productivity effect of permanent and temporary labor contracts in the Italian manufacturing sector," Economic Modelling, Elsevier, vol. 36(C), pages 666-672.
  16. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2014. "The Effects of Regulations and Business Cycles on Temporary Contracts, the Organization of Firms and Productivity," CEDLAS, Working Papers 0154, CEDLAS, Universidad Nacional de La Plata.

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