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The Impact of Temporary Employment on Labour Productivity: Evidence from an Industry-Level Panel of EU Countries

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  • Lisi, Domenico

Abstract

In recent years the availability of new industry-level data allowed to evaluate the impact of labour market policies more consistently than previous standard cross-country studies. In this paper an industry-level panel is exploited to evaluate the impact of less stringent Employment Protection Legislation (EPL) for temporary employment (TE) in EU countries. A reduced form model is estimated to identify the overall effect on labour productivity growth. The advantage of using industry-level data is fourfold. First, as in standard cross-country studies, the cross-country variation of EPL is still exploited. Second, in contrast with the cross-country analysis, the specification allows us to control for unobserved fixed effects, potentially correlated with the level of EPL. Third, as the previous literature emphasised, the within-industry “composition effect” appears to be negligible, allowing us to identify the “independent effect” of TE. Fourth, to the extent that events in a single industry are not able alone to affect the policy in a country, the specification is less subject to the simultaneity problem between variable of interest and policy. The theoretical literature on TE has not established a clear prediction on the sign of the effect, existing different convincing reasons for both directions. Thus, the results of the analysis have potentially important policy implications. Our finding is that the introduction of temporary contracts has a negative, even if small in magnitude, effect on labour productivity growth.

Suggested Citation

  • Lisi, Domenico, 2009. "The Impact of Temporary Employment on Labour Productivity: Evidence from an Industry-Level Panel of EU Countries," MPRA Paper 26076, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:26076
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    References listed on IDEAS

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    Cited by:

    1. Addessi, William & Saltari, Enrico & Tilli, Riccardo, 2014. "R&D, innovation activity, and the use of external numerical flexibility," Economic Modelling, Elsevier, vol. 36(C), pages 612-621.
    2. William Addessi & Enrico Saltari & Riccardo Tilli, 2011. "R&D and Innovation Activities and the Use of External Numerical Flexibility," Working Papers 150, University of Rome La Sapienza, Department of Public Economics.

    More about this item

    Keywords

    labour productivity; temporary employment; EPL; difference-in-differences;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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