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Financing constraints and fixed-term employment contracts

Caggese, Andrea and Cuñat, Vicente (2008) Financing constraints and fixed-term employment contracts. Economic Journal, 118 (533). pp. 2013-2046. ISSN 0013-0133

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Abstract

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: http://www.blackwellpublishing.com/journal.asp?ref...
Additional Information: © 2008 The Authors
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HG Finance
Sets: Research centres and groups > Managerial Economics and Strategy Group
Departments > Finance
Research centres and groups > Financial Markets Group (FMG)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 08 Feb 2011 09:48
URL: http://eprints.lse.ac.uk/32240/

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