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Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms

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URI: https://hdl.handle.net/10016/38875
ISSN: 1869-4187
DOI: https://doi.org/10.1007/s13209-016-0150-9
UXXI: AR/0000030217
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employment_S_2016.pdf (798.02 KB)
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2016-01-01
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Springer
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This paper analyzes how changes in the firing-costs gap between permanent and temporary workers affect firms¿ TFP in a dual labour market. We argue that, under plausible conditions, firms¿ temp-to-perm conversion rates go down when this gap increases. Temporary workers respond to lower conversion rates by exerting less effort, while firms react by providing less paid-for training. Both channels lead to a decline in TFP. We test these implications in a large panel of Spanish manufacturing firms from 1991 to 2005, looking at the effects of three labour market reforms which entailed substantial changes in the firing-costs gap. Our empirical findings provide some support for the above-mentioned mechanism. © 2016, The Author(s).
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Firms’ TFP, Workers’ effort, Training, Temporary contracts, Firing costs
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Dolado, J. J., Ortigueira, S., & Stucchi, R. (2016). Does dual employment protection affect TFP? Evidence from Spanish manufacturing firms. SERIEs, 7 (4), pp. 421-459.
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