How binding are legal limits? Transitions from temporary to permanent work in Spain

This paper studies the duration pattern of fixed-term contracts and the determinants of their conversion into permanent ones in Spain, where 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 pe...

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Bibliographic Details
Published in:Labour economics 2007-04, Vol.14 (2), p.153-183
Main Authors: Güell, Maia, Petrongolo, Barbara
Format: Article
Language:English
Subjects:
Duration models
Temporary contracts
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Summary:This paper studies the duration pattern of fixed-term contracts and the determinants of their conversion into permanent ones in Spain, where 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 conversion rates are generally below 10%. Our estimated conversion rates roughly increase with tenure, with a pronounced spike at the legal limit, when there is no legal way to retain the worker on a temporary contract. We argue that estimated differences in conversion rates across categories of workers can stem from differences in worker outside options and thus the power to credibly threat to quit temporary jobs.
ISSN:0927-5371
1879-1034
DOI:10.1016/j.labeco.2005.09.001