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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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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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  • José Ignacio García Pérez & Yolanda Rebollo Sanz, 2005. "The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation?," Economic Working Papers at Centro de Estudios Andaluces E2005/16, Centro de Estudios Andaluces.
    • Handle: RePEc:cea:doctra:e2005_16
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    Cited by:

    1. Miguel Á. Malo & Begoña Cueto, 2013. "Temporary Contracts across Generations: Long-term effects of a labour market reform at the margin," Cuadernos de Economía - Spanish Journal of Economics and Finance, Asociación Cuadernos de Economía, vol. 36(101), pages 84-99, Agosto.
    2. J. Ignacio García-Pérez & Yolanda F. Rebollo Sanz, 2009. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Investigaciones Economicas, Fundación SEPI, vol. 33(1), pages 97-130, January.
    3. Inmaculada Cebrián & Gloria Moreno & Luis Toharia, 2011. "La estabilidad laboral y los programas de fomento de la contratación indefinida," Hacienda Pública Española / Review of Public Economics, IEF, vol. 198(3), pages 103-127, September.
    4. 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.
    5. 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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    Keywords

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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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