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How binding are legal limits? Transitions from temporary to permanent work in Spain

  • Maia Güell
  • Barbara Petrongolo

This paper studies the duration pattern of …xed-term contracts and the determinants of their conversion into permanent ones in Spain, where the share of …xed-term employment is the highest in Europe. We estimate a duration model for temporary employment, with competing risks of terminating into permanent employment versus alternative states, and ‡exible duration dependence. We …nd that conversion rates are generally below 10%. Our estimated conversion rates roughly increase with tenure, with a pronounced spike at the legal limit, when there is no legal way to retain the worker on a temporary contract. We argue that estimated di¤erences in conversion rates across categories of workers can stem from di¤erences in worker outside options and thus the power to credibly threat to quit temporary jobs.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 682.

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Date of creation: May 2003
Date of revision: Jul 2005
Handle: RePEc:upf:upfgen:682
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  1. Engellandt, Axel & Riphahn, Regina, 2004. "Temporary Contracts and Employee Effort," CEPR Discussion Papers 4178, C.E.P.R. Discussion Papers.
  2. Alison L Booth & Juan J. Dolado & Jeff Frank, 2002. "Symposium On Temporary Work Introduction," Economic Journal, Royal Economic Society, vol. 112(480), pages F181-F188, June.
  3. 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.
  4. Juan F. Jimeno & Luis Toharia, 1993. "The effects of fixed-term employment on wages: theory and evidence from Spain," Investigaciones Economicas, Fundación SEPI, vol. 17(3), pages 475-494, September.
  5. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2002. "A Matching Model Of Crowding-Out And On-The- Job Search (With An Application To Spain)," Economics Working Papers we022809, Universidad Carlos III, Departamento de Economía.
  6. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  7. J. Ignacio García-Pérez & Fernando Muñoz-Bullón, 2003. "The Nineties In Spain: Too Much Flexibility In The Youth Labour Market?," Business Economics Working Papers wb030302, Universidad Carlos III, Departamento de Economía de la Empresa.
  8. De la Rica Goiricelaya, Sara & Felgueroso, Florentino, 2002. "Wage differentials between Permanent and Temporal Contracts: Further Evidence," DFAEII Working Papers 2002-07, University of the Basque Country - Department of Foundations of Economic Analysis II.
  9. 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.
  10. Hernanz, Virginia & Jimeno, Juan F & Kugler, Adriana D., 2003. "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labour Market Reforms," CEPR Discussion Papers 3724, C.E.P.R. Discussion Papers.
  11. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(1), pages 108-22, February.
  12. 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.
  13. Olympia Bover & Ramón Gómez, 2004. "Another look at unemployment duration: exit to a permanent vs. a temporary job," Investigaciones Economicas, Fundación SEPI, vol. 28(2), pages 285-314, May.
  14. Maia Guell, 2000. "Fixed-term contracts and unemployment: an efficiency wage analysis," LSE Research Online Documents on Economics 20181, London School of Economics and Political Science, LSE Library.
  15. Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
  16. César Alonso-Borrego & Jesús Fernández-Villaverde & José E. Galdón-Sánchez, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," Economics Working Papers we042307, Universidad Carlos III, Departamento de Economía.
  17. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  18. Jenkins, Stephen P, 1995. "Easy Estimation Methods for Discrete-Time Duration Models," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(1), pages 129-38, February.
  19. Wasmer, E., 1997. "Competition for Jobs in a Growing Economy and the Emergence of Dualism," DELTA Working Papers 97-13, DELTA (Ecole normale supérieure).
  20. José Varejão & Pedro Portugal, 2003. "Why Do Firms Use Fixed-Term Contracts?," CEF.UP Working Papers 0310, Universidade do Porto, Faculdade de Economia do Porto.
  21. Juan J Dolado & Carlos Garcia--Serrano & Juan F. Jimeno, 2002. "Drawing Lessons From The Boom Of Temporary Jobs In Spain," Economic Journal, Royal Economic Society, vol. 112(721), pages F270-F295, June.
  22. Nickell, Stephen J, 1979. "Estimating the Probability of Leaving Unemployment," Econometrica, Econometric Society, vol. 47(5), pages 1249-66, September.
  23. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2005. "Temporary Work Agencies in Italy: A Springboard Toward Permanent Employment?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 1-27, September.
  24. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  25. repec:fda:fdaeee:18 is not listed on IDEAS
  26. Narendranathan, W. & Stewart, M.B., 1989. "Modelling The Probability Of Leaving Unemployment: Competing Risks Models With Flexible Baseline Hazards," The Warwick Economics Research Paper Series (TWERPS) 331, University of Warwick, Department of Economics.
  27. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  28. Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-56, July.
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