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The use of permanent and temporary jobs across Spanish regions: Do unit labour cost differentials offer an explanation?

  • J. Ignacio García-Pérez

    ()

    (Department of Economics, Universidad Pablo de Olavide & Fundación Centro de Estudios Andaluces)

  • Yolanda Rebollo Sanz

    ()

    (Department of Economics, Universidad Pablo de Olavide)

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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File URL: http://www.upo.es/serv/bib/wps/econ0611.pdf
File Function: First version, 2006
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Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.11.

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Length: 30 pages
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.11
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  17. 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.
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