Fixed-Term Contracts in Europe: A Reassessment in Light of the Importance of Match-Specific Learning
The use of fixed-term contracts has proliferated during the past decade in many European countries due to the relaxation of their regulation. Policymakers aimed to reduce labor-market rigidities by offering to firms these flexible contracts with little or no dismissal costs but with a finite contract length. The analysis of these contracts has thus far focused on their effect on the overall employment rate. This study high-lights that in the evaluation of fixed-term contracts as policy instruments it is also important to look at their effect on productivity as a function of tenure and on the tenure distribution of employed workers. These two effects jointly determine the policy's overall productivity effect. I show that the liberalization of fixed-term contracts can have a significant effect on the productivity of employment relationships when match-specific learning is important. Moreover, the effect is different depending on the assumption about the nature of the learning process. I distinguish between two kinds of match-specific learning - learning-by-doing and learning about match quality - and show that under learning-by-doing the overall productivity effect is necessarily negative, while under learning about match quality the effect could be either negative or positive depending on how much experimentation improves in the presence of fixed-term contracts. I calibrate the model based on earlier empirical work and find that indeed the productivity effect is positive as output per worker increases by 0.6%.
|Date of creation:||Jun 2001|
|Date of revision:|
|Contact details of provider:|| Postal: 1112 Budapest, Budaorsi ut 45.|
Phone: (+36-1) 309-2652
Fax: (36-1) 319-3136
Web page: http://econ.core.hu
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
- Jovanovic, Boyan & Nyarko, Yaw, 1995.
"The transfer of human capital,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 19(5-7), pages 1033-1064.
- Topel, Robert H, 1991.
"Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority,"
Journal of Political Economy,
University of Chicago Press, vol. 99(1), pages 145-76, February.
- Robert H. Topel, 1990. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," NBER Working Papers 3294, National Bureau of Economic Research, Inc.
- 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.
- Alonso-Borrego, César & Aguirregabiria, Víctor, 1999.
"Labor contracts and flexibility : evidence from a labor markt reform in Spain,"
DES - Working Papers. Statistics and Econometrics. WS
6302, Universidad Carlos III de Madrid. Departamento de Estadística.
- Victor Aguirregabiria & Cesar Alonso-Borrego, 2014. "Labor Contracts And Flexibility: Evidence From A Labor Market Reform In Spain," Economic Inquiry, Western Economic Association International, vol. 52(2), pages 930-957, 04.
- 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.
- Victor Aguirregabiria & Cesar Alonso-Borrego, 2009. "Labor Contracts and Flexibility: Evidence from a Labor Market Reform in Spain," Working Papers tecipa-346, University of Toronto, Department of Economics.
- Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
- Cabrales, Antonio & Hopenhayn, Hugo A., 1997. "Labor-market flexibility and aggregate employment volatility," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 46(1), pages 189-228, June.
- Dale T. Mortensen & Christopher A. Pissarides, 1994.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Review of Economic Studies,
Oxford University Press, vol. 61(3), pages 397-415.
- Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Brewster, Chris & Mayne, Lesley & Tregaskis, Olga, 1997. "Flexible working in Europe," Journal of World Business, Elsevier, vol. 32(2), pages 133-151, July.
- Farber, Henry S, 1994. "The Analysis of Interfirm Worker Mobility," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 554-93, October.
- 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.
- Farber, Henry S., 1999. "Mobility and stability: The dynamics of job change in labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 37, pages 2439-2483 Elsevier.
- Garcia Serrano, Carlos, 1999.
"Worker Turnover and Job Reallocation: The Role of Fixed-Term Contracts,"
Oxford Economic Papers,
Oxford University Press, vol. 51(1), pages 237a, January.
- Serrano, Carlos Garcia, 1998. "Worker Turnover and Job Reallocation: The Role of Fixed-Term Contracts," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 709-25, October.
When requesting a correction, please mention this item's handle: RePEc:has:discpr:0110. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adrienn Foldi)
If references are entirely missing, you can add them using this form.