Financing Constraints and Fixed-Term Employment Contracts

34 Pages Posted: 8 Oct 2008

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: 0000

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.

Suggested Citation

Caggese, Andrea and Cuñat, Vicente, Financing Constraints and Fixed-Term Employment Contracts (0000). The Economic Journal, Vol. 118, Issue 533, pp. 2013-2046, November 2008. Available at SSRN: https://ssrn.com/abstract=1280449 or http://dx.doi.org/10.1111/j.1468-0297.2008.02200.x

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

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