CAN FIXED-TERM CONTRACTS PUT LOW SKILLED YOUTH ON A BETTER CAREER PATH? EVIDENCE FROM SPAIN

By reducing the commitment made by employers, fixed-term contracts can help low-skilled youth find a first job. However, the long-term impact of fixed-term contracts on these workers' careers may be negative. Using Spanish social security data, we analysed the impact of a large liberalisation i...

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Bibliographic Details
Published in:The Economic journal (London) 2019-05, Vol.129 (620), p.1693-1730
Main Authors: García-Pérez, J. Ignacio, Marinescu, Ioana, Castello, Judit Vall
Format: Article
Language:English
Subjects:
Career development
Contract law
Contracts
Discontinuity
Earnings
Economic theory
Employment
Labor market
Liberalization
Regulation
Social security
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Summary:By reducing the commitment made by employers, fixed-term contracts can help low-skilled youth find a first job. However, the long-term impact of fixed-term contracts on these workers' careers may be negative. Using Spanish social security data, we analysed the impact of a large liberalisation in the regulation of fixed-term contracts in 1984. Using a cohort regression discontinuity design, we find that over the first 10 years in the labour market, the reform reduced the number of days worked (by 4.9%) and earnings (by 9.8%). Over 27 years of labour market career, yearly earnings losses amount to a persistent 7.3%.
ISSN:0013-0133
1468-0297
DOI:10.1111/ecoj.12621