The Effect of Product Market Competition on Job Instability

Abstract:     
This paper assesses the impact of product market competition on job instability as proxied by the use of fixed-term labor contracts. Using both worker data from the Spanish Labor Force Survey and firm data from the Spanish Business Strategies Survey, I show that job instability rises with competition. In particular, a one standard deviation increase in competition in an economic sector decreases the probability that a fixed-term worker gets an open-ended contract within that sector in a given year by more than 30%. The effect is identified by means of exogenous shifts in competition brought about by changes in legislation.

Number of Pages in PDF File: 74

Keywords: fixed-term employment, product market competition, labor contract

JEL Classification: J24, M51, C41, C33, C35, J6, L1

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