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

Guell, Maia and Petrongolo, Barbara (2003) How binding are legal limits?: transitions from temporary to permanent work in Spain. 3931. Centre for Economic Policy Research, London, UK.

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Abstract

In the mid-1980s, several European countries, characterized by high levels of employment protection, introduced fixed-term contracts. Since then most accessions to employment have been through fixed-term contracts. This Paper studies the duration pattern of fixed-term contracts and the determinants of their conversion into permanent ones in Spain, a country in which the share of fixed-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 flexible duration dependence. We find that the shape of the baseline hazard is suggestive of two possible uses of fixed-term contracts by employers. First, there is a clear, pronounced spike at three years of duration, coinciding with the legal maximum duration of these contracts, suggesting that some fixedterm contracts are only converted into permanent ones when there is no other way to retain the worker. Second, there is a spike around one year of duration, which supports the idea that some of these contracts are also used as a screening device. Workers who successfully pass the screening may obtain a permanent renewal much before the legal duration limit of their contracts.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.cepr.org
Additional Information: © 2003 Maia Güell and Barbara Petrongolo
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: J - Labor and Demographic Economics > J4 - Particular Labor Markets > J41 - Contracts: Specific Human Capital, Matching Models, Efficiency Wage Models, and Internal Labor Markets
C - Mathematical and Quantitative Methods > C4 - Econometric and Statistical Methods: Special Topics > C41 - Duration Analysis
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J60 - General
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 3931
Date Deposited: 04 Jun 2008 10:28
URL: http://eprints.lse.ac.uk/5326/

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