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Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms

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Listed author(s):
  • Dolado, Juan J.
  • Ortigueira, Salvador
  • Stucchi, Rodolfo

Abstract

This paper analyzes the effect of having a large gap in firing costs between permanent and temporary workers in a dual labour market on TFP development at the firm level. We propose a simple model showing that, under plausible conditions, both temporary workers' effort and firms' temp-to-perm conversion rates decrease when that gap increases. We test this implication by means of a panel of Spanish manufacturing firms from 1991 to 2005, using as natural experiments some labour market reforms entailing substantial changes in this gap. Our main empirical finding is that reforms leading to a lower gap enhanced conversion rates, which in turn increased firms' TFP, and conversely for reforms that increased the gap.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8763.

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Date of creation: Jan 2012
Handle: RePEc:cpr:ceprdp:8763
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Keywords: firing costs; Firms' TFP; temporary workers; worker's effort;

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Find related papers by JEL classification:
  • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
  • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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  18. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages 270-295, June.
  19. 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.
  20. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 533-572, 05.
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  27. repec:oup:restud:v:79:y::i:3:p:899-931 is not listed on IDEAS
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