Financing Constraints and Fixed-Term Employment Contracts

55 Pages Posted: 25 Jul 2007

See all articles by Andrea Caggese

Andrea Caggese

Universitat Pompeu Fabra - Department of Economics and Business (DEB)

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group

Multiple version iconThere are 2 versions of this paper

Date Written: June 2006

Abstract

This paper studies the interactions between financing constraints and the employment decisions of firms when both fixed-term and permanent employment contracts are available. We first develop a dynamic model that shows the effects of financing constraints and firing costs on employment decisions. Once calibrated, the model shows that financially constrained firms tend to use more intensely fixed term workers, and to 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 unique panel data of Italian manufacturing firms with detailed information about the type of workers employed by the firms and about firm financing constraints.

Keywords: Finacing Constraints, Employment, Fixed-Term Contracts

JEL Classification: J21, J23, G32

Suggested Citation

Caggese, Andrea and Cuñat, Vicente, Financing Constraints and Fixed-Term Employment Contracts (June 2006). Available at SSRN: https://ssrn.com/abstract=1002867 or http://dx.doi.org/10.2139/ssrn.1002867

Andrea Caggese (Contact Author)

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

Vicente Cuñat

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://www.vicentecunat.com

Register to save articles to
your library

Register

Paper statistics

Downloads
61
Abstract Views
557
rank
343,636
PlumX Metrics