Labour Demand, Flexible Contracts and Financial Factors: Firm-Level Evidence from Spain*

19 Pages Posted: 6 May 2008

Date Written: 0000

Abstract

We estimate models of labour demand for a panel of 3,400 Spanish manufacturing firms over the period 19852001. We examine the roles of fixed-term contracts, financial factors and a policy reform in 1997 affecting permanent contracts by lowering payroll taxes and dismissal costs. Compared with permanent employment, the demand for flexible labour displays: (i) greater sensitivity to financial factors; (ii) greater cyclical sensitivity; (iii) a larger average wage elasticity; and (iv) less inertia. Our analysis of the 1997 policy reform suggests that a 5 percentage point reduction in the payroll tax is associated with an 8% increase in permanent labour demand.

Suggested Citation

Benito, Andrew and Hernando, Ignacio, Labour Demand, Flexible Contracts and Financial Factors: Firm-Level Evidence from Spain* (0000). Oxford Bulletin of Economics and Statistics, Vol. 70, Issue 3, pp. 283-301, June 2008, Available at SSRN: https://ssrn.com/abstract=1128389 or http://dx.doi.org/10.1111/j.1468-0084.2007.00494.x

Andrew Benito

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Ignacio Hernando

Banco de España ( email )

Madrid 28014
Spain
+34 91 338 5186 (Phone)
+34 91 338 5678 (Fax)

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