Paper #602

Title:

Fixed-term contracts and the duration distribution of unemployment

Author:

Maia Güell

Date:

February 2002 (Revised: May 2003)

Abstract:

In the mid-1980s, many European countries introduced fixed-term contracts. Since then their labor markets have become more dynamic. This paper studies the implications of such reforms for the duration distribution of unemployment, with particular emphasis on the changes in the duration dependence. I estimate a parametric duration model using cross-sectional data drawn from the Spanish Labor Force Survey from 1980 to 1994 to analyze the chances of leaving unemployment before and after the introduction of fixed-term contracts. I find that duration dependence has increased since such reform. Semi-parametric estimation of the model also shows that for long spells, the probability of leaving unemployment has decreased since such reform.

Keywords:

Cross-sectional data, duration model, turnover

JEL codes:

C41, J63, J64

Area of Research:

Labour, Public, Development and Health Economics

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