How Binding are Legal Limits? Transitions from Temporary to Permanent Work in Spain

38 Pages Posted: 6 Aug 2003

See all articles by Maia Güell

Maia Güell

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Barbara Petrongolo

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

Abstract

In the mid-1980s, several European countries, characterized by high levels of employment protection, introduced fixed-term contracts. Since then most accessions to employment have been through fixed-term contracts. This Paper studies the duration pattern of fixed-term contracts and the determinants of their conversion into permanent ones in Spain, a country in which the share of fixed-term employment is the highest in Europe. We estimate a duration model for temporary employment, with competing risks of terminating into permanent employment versus alternative states, and flexible duration dependence. We find that the shape of the baseline hazard is suggestive of two possible uses of fixed-term contracts by employers. First, there is a clear, pronounced spike at three years of duration, coinciding with the legal maximum duration of these contracts, suggesting that some fixed-term contracts are only converted into permanent ones when there is no other way to retain the worker. Second, there is a spike around one year of duration, which supports the idea that some of these contracts are also used as a screening device. Workers who successfully pass the screening may obtain a permanent renewal much before the legal duration limit of their contracts.

Keywords: Fixed-term contracts, duration models

JEL Classification: C41, J41, J60

Suggested Citation

Guell, Maia and Petrongolo, Barbara, How Binding are Legal Limits? Transitions from Temporary to Permanent Work in Spain (June 2003). CEPR Discussion Paper No. 3931. Available at SSRN: https://ssrn.com/abstract=431840

Maia Guell

Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )

Ramon Trias Fargas 25-27
Barcelona, 08005
Spain
+34 93 542 2717 (Phone)
+34 94 816 9721 (Fax)

HOME PAGE: http://www.econ.upf.es/~mguell/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Barbara Petrongolo (Contact Author)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 7799 (Phone)
+44 20 7955 7595 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

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