Do Firms Demand Temporary Workers When They Face Workload Fluctuation? Cross-Country Firm-Level Evidence on the Conditioning Effect of Employment Protection

30 Pages Posted: 13 Oct 2012

Date Written: October 13, 2012

Abstract

Although the negative economic effects of temporary employment are widely discussed, cross-country research on firms’ demand for temporary employment is rare. National studies indicate that workload fluctuations are one major motive for firms to employ temporary workers. By studying a novel data set of 18,500 firms from 20 countries, we show that workload fluctuations increase the probability of hiring temporary workers by eight percentage points in rigid labour markets, but no such effect is observed in flexible labour markets. This conditioning effect of employment protection is in line with a recently developed search-and-matching model. Our results are robust to subgroups, subsamples and alternative estimation strategies.

Keywords: temporary employment, employment protection, labour demand, firm-level data

JEL Classification: J23, J28, J21, J63, J68, J82

Suggested Citation

Dräger, Vanessa and Marx, Paul, Do Firms Demand Temporary Workers When They Face Workload Fluctuation? Cross-Country Firm-Level Evidence on the Conditioning Effect of Employment Protection (October 13, 2012). IZA Discussion Paper No. 6894. Available at SSRN: https://ssrn.com/abstract=2161231

Paul Marx

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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