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Financing constraints and fixed-term employment contracts

Caggese, Andrea and Cuñat, Vicente ORCID: 0000-0001-7504-2801 (2008) Financing constraints and fixed-term employment contracts. The Economic Journal, 118 (533). pp. 2013-2046. ISSN 0013-0133

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Identification Number: 10.1111/j.1468-0297.2008.02200.x


This article studies the interactions between financing constraints and the employment decisions of firms when both fixed-term and permanent employment contracts are available. It develops the model of an industry where firms face financing frictions and produce output using both fixed-term and permanent workers. Once calibrated, the model shows that financially constrained firms use fixed-term workers more intensely and make them absorb a larger fraction of the total employment volatility than financially unconstrained firms do. We test and confirm the predictions of the model on a panel data of Italian manufacturing firms with detailed information about financing constraints and the type of workers employed by the firms.

Item Type: Article
Official URL:
Additional Information: © 2008 The Authors
Divisions: Finance
Financial Markets Group
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Date Deposited: 08 Feb 2011 09:48
Last Modified: 20 May 2024 05:03

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