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

  • Stucchi, Rodolfo
  • Ortigueira, Salvador
  • Dolado, Juan José

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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File URL: http://e-archivo.uc3m.es/bitstream/handle/10016/12796/we1137.pdf?sequence=1
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Paper provided by Universidad Carlos III de Madrid. Departamento de Economía in its series UC3M Working papers. Economics with number we1137.

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Date of creation: Dec 2011
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Handle: RePEc:cte:werepe:we1137
Contact details of provider: Web page: http://www.eco.uc3m.es/

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  1. 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.
  2. Alonso-Borrego, César & Aguirregabiria, Víctor, 2009. "Labor contracts and flexibility : evidence from a labor market reform in Spain," UC3M Working papers. Economics we091811, Universidad Carlos III de Madrid. Departamento de Economía.
  3. Claudio Michelacci & Josep Pijoan-Mas, 2012. "Intertemporal Labour Supply with Search Frictions," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 899-931.
  4. 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.
  5. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  6. Sara Rica & Juan Dolado & Vanesa Llorens, 2008. "Ceilings or floors? Gender wage gaps by education in Spain," Journal of Population Economics, Springer;European Society for Population Economics, vol. 21(3), pages 751-776, July.
  7. Stucchi, Rodolfo & Escribano, Álvaro, 2008. "Catching up in total factor productivity through the business cycle : evidence from Spanish manufacturing surveys," UC3M Working papers. Economics we085125, Universidad Carlos III de Madrid. Departamento de Economía.
  8. repec:oup:restud:v:79:y::i:3:p:899-931 is not listed on IDEAS
  9. César Alonso-Borrego, 2010. "Firm behavior, market deregulation and productivity in Spain," Working Papers 1035, Banco de España;Working Papers Homepage.
  10. González, Xulia & Miles-Touya, Daniel, 2012. "Labor market rigidities and economic efficiency: Evidence from Spain," Labour Economics, Elsevier, vol. 19(6), pages 833-845.
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