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The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation?

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  • J. Ignacio García-Pérez

    () (Department of Economics, Universidad Pablo de Olavide & Fundación Centro de Estudios Andaluces)

  • Yolanda Rebollo Sanz

    () (Department of Economics, Universidad Pablo de Olavide)

Abstract

We study the use of permanent and temporary contracts across Spanish regions during the period 1995-2001. First we show that there are significant differences among the regional rates of permanent employment and that these differences tend to persist over time. To understand the underlying factors behind these observed differences we estimate a binary choice model for the individual probability of having a permanent contract, taking advantage of the panel data dimension of the Spanish Labour Force Survey. Our main results are that unit labour cost differentials, and thus labour productivity and total labour cost differentials, partially explain the divergence of regional permanent employment rates. Moreover, compared to the influence of regional fixed effects and other possible explanations such as sector specialisation or the presence of small firms in the region, unit labour costs explain more than two thirds of the observed variance in the permanent employment rate across Spanish regions, once all the relevant heterogeneity is taken into account.

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File URL: http://www.upo.es/serv/bib/wps/econ0611.pdf
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Bibliographic Info

Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.11.

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Length: 30 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.11

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Keywords: Temporary Employment; Unit Labour Costs; Random Effects; Spanish Regions.;

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  1. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, 2002. "Employment consequences of restrictive permanent contracts: Evidence from Spanish labor market reforms," Economics Working Papers 651, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  3. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  4. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2000. "Temporary Jobs: Stepping Stones or Dead Ends?," IZA Discussion Papers 205, Institute for the Study of Labor (IZA).
  5. Guell, Maia & Petrongolo, Barbara, 2007. "How binding are legal limits? Transitions from temporary to permanent work in Spain," Labour Economics, Elsevier, vol. 14(2), pages 153-183, April.
  6. Bentolila, Samuel & Saint-Paul, Gilles, 1992. "The macroeconomic impact of flexible labor contracts, with an application to Spain," European Economic Review, Elsevier, vol. 36(5), pages 1013-1047, June.
  7. Bertil Holmlund & Donald Storrie, 2002. "Temporary Work in Turbulent Times: The Swedish Experience," CESifo Working Paper Series 671, CESifo Group Munich.
  8. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers 97-13, DELTA (Ecole normale supérieure).
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  13. Saint-Paul, Gilles, 1993. "On the Political Economy of Labour Market Flexibility," CEPR Discussion Papers 803, C.E.P.R. Discussion Papers.
  14. José Ignacio García Pérez & Yolanda Rebollo Sanz, 2004. "Wage changes through job mobility in Europe: A multinomial endogenous switching approach," Economic Working Papers at Centro de Estudios Andaluces E2004/70, Centro de Estudios Andaluces.
  15. Jeffrey M. Wooldridge, 2004. "On the robustness of fixed effects and related estimators in correlated random coefficient panel data models," CeMMAP working papers CWP04/04, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  16. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
  17. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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Cited by:
  1. Inmaculada Cebrián & Gloria Moreno & Luis Toharia, 2011. "La estabilidad laboral y los programas de fomento de la contratación indefinida," Hacienda Pública Española, IEF, vol. 198(3), pages 103-127, September.
  2. José Antonio Ariza Montes, 2008. "La estabilidad laboral en Andalucía: un análisis comparado entre hombres y mujeres mediante un modelo de regresión logística," Economic Working Papers at Centro de Estudios Andaluces E2008/06, Centro de Estudios Andaluces.
  3. J.Ignacio García Pérez & Yolanda Rebollo Sanz, 2007. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Economic Working Papers at Centro de Estudios Andaluces E2007/07, Centro de Estudios Andaluces.
  4. Sergi Jiménez Martín & Judit Vall Castello, 2009. "Business Cycle Effects on Labour Force Transitions for Older People in Spain," Working Papers 2009-25, FEDEA.

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