Working Paper: CEPR ID: DP7055
Authors: Juan J. Dolado; Rodolfo Stucchi
Abstract: This paper evaluates the impact of the widespread use of fixed-term contracts in Spain on firms' TFP, via its effect on workers' effort. We propose a simple analytical framework showing that, under plausible conditions, workers' effort depends positively on their perception (for given level of effort) about firms' willingness to convert fixed-term contracts into permanent ones. We test this implication using manufacturing firm level data from 1991 to 2005 by means of nonparametric tests of stochastic dominance and parametric multivariate regression approaches. Our main findings are that high conversion rates increase firm's productivity while high shares of temporary contracts decrease it. Both effects are quantitatively relevant.
Keywords: firms; TFP; temporary workers; workers effort
JEL Codes: J24; C14; C52; D24; O52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Higher conversion rates of temporary contracts to permanent ones (J63) | Increased productivity in firms (D21) |
| Higher share of temporary contracts (J63) | Lower productivity (O49) |