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Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform

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  • Martins, Pedro S.

Abstract

Fixed-term contracts (FTCs) may be an important tool to promote employment, particularly in recessions or when permanent contracts are costly. Therefore, it may be useful to vary some of the legal parameters of FTCs over the business cycle, namely increasing their flexibility during downturns. We evaluate this idea by examining the effects of a 2011 law that increased the maximum duration of FTCs in Portugal, in the midst of a recession. Our analysis is based on regression-discontinuity (and difference-in-differences) methods and linked panel data. We find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Worker churning is reduced significantly, as mobility of eligible fixed-term workers to other firms drops by 10%. Employment also increases significantly for younger workers.

Suggested Citation

  • Martins, Pedro S., 2017. "Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform," GLO Discussion Paper Series 101, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:101
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    References listed on IDEAS

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    Cited by:

    1. Pedro S. Martins, 2016. "The third worker: Assessing the trade-off between employees and contractors," Working Papers 75, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    2. Pedro S. Martins, 2016. "Employment Resilience through Services Exports? Evidence from Matched Employer-Employee Data," Working Papers 79, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    3. Pedro S. Martins, 2016. "Can overtime premium flexibility promote employment? Firm-and worker-level evidence from a labour law reform," Nova SBE Working Paper Series wp607, Universidade Nova de Lisboa, Nova School of Business and Economics.
    4. Pedro S. Martins, 2016. "Do wages increase when severance pay drops? Not in recessions," Working Papers 77, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    5. Martins, Pedro S., 2017. "Economic effects of overtime premium flexibility: Firm- and worker-level evidence from a law reform," GLO Discussion Paper Series 102, Global Labor Organization (GLO).

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    More about this item

    Keywords

    Employment law; worker mobility; segmentation; counterfactual evaluation;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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