Paper #682

Title:

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

Authors:

Maia Güell and Barbara Petrongolo

Date:

May 2003

Abstract:

This paper studies the duration pattern of �xed-term contracts and the determinants of their conversion into permanent ones in Spain, where the share of �xed-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 �exible duration dependence. We �nd 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 di�erences in conversion rates across categories of workers can stem from di�erences in worker outside options and thus the power to credibly threat to quit temporary jobs.

Keywords:

Fixed-term contracts, duration models

JEL codes:

C41, J41, J60

Area of Research:

Labour, Public, Development and Health Economics

Published in:

Labour Economics, 14 (2), 153-183, 2007

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