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The use of fixed-term contracts and the labour adjustment in Belgium

Author

Listed:
  • Emmanuel Dhyne

    () (National Bank of Belgium, Research Department
    Warocqué Research Center, Université de Mons)

  • Benoit Mahy

    () (Warocqué Research Center, Université de Mons
    Département d’Economie Appliquée, Université Libre de Bruxelles)

Abstract

This paper aims to document and analyse the use of fixed-term contracts (FTC) and to analyse the dynamics of labour adjustment by type of labour contract at the firm level, drawing on the detailed breakdown of both the labour force and labour entries and exits that are available in the "Belgian Firms' Social Balance Sheets" dataset. It also aims to investigate the structure of labour adjustment costs by type of labour contract, using the methodology proposed by Goux, Maurin and Pauchet (2001). Results first indicate that flexible labour contracts are not only used to facilitate short-term labour adjustment but also as a screening device. The findings also suggest that when a firm decides to introduce flexible labour into its production process, it does also this to meet long-run objectives such as implementing minimising costs innovations. It is further estimated that the introduction of FTCs does not seem to affect the speed of indefinite-term contracts (ITC) adjustment. Our results also tend to indicate that the FTC is a key adjustment variable in response to cost shocks and to unexpected demand fluctuations while, in response to expected fluctuations in output, firms then prefer to adjust their level of permanent employment. Finally, and as far as the structure of labour adjustment costs in Belgium is concerned, the marginal recruitment cost under an ITC represents 12.4% of the marginal termination cost of ITC, while the marginal cost associated with the recruitment under an FTC only accounts for 0.8% of its ITC counterpart

Suggested Citation

  • Emmanuel Dhyne & Benoit Mahy, 2009. "The use of fixed-term contracts and the labour adjustment in Belgium," Working Paper Research 169, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:200907-02
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    File URL: https://www.nbb.be/doc/oc/repec/reswpp/wp169en.pdf
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    Citations

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    Cited by:

    1. G. de Walque & M. Druant & Ph. Du Caju & C. Fuss, 2010. "Lessons of the Wage Dynamics Network," Economic Review, National Bank of Belgium, issue i, pages 55-75, June.
    2. Romina Giuliano & Stephan Kampelmann & Benoît Mahy & François Rycx, 2017. "Short Notice, Big Difference? The Effect of Temporary Employment on Firm Competitiveness across Sectors," British Journal of Industrial Relations, London School of Economics, vol. 55(2), pages 421-449, June.

    More about this item

    Keywords

    labour dynamics; fixed-term contract; indefinite-term contract; agency workers;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J82 - Labor and Demographic Economics - - Labor Standards - - - Labor Force Composition

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