Labor market effects of fixed-term employment contracts in Spain

Abstract

This article studies the labor market effects of flxed-term employment contracts in Spain. First, we present various relevant features of the institutional setting which gave rise to and resulted from the introduction of fixed-term contracts. Second, we look at the evolution of temporary and permanent employment over the period 1987-1995 for which data are available. Then we discuss the implications of the distinction between temporary and permanent in the employment relationship for labor market outcomes in Spain. Third, we undertake the empírical analysis, which is aimed al knowing who are the workers under flxed-term contracts, how much they earn as compared to permanent workers, and how likely they are to obtain an indeflnite employment relationship. We find that non household heads, youth, less educated workers, women and private sector employees are over-represented among the temporary workers. These workers earn signiflcantly less than those with indefmite contracts, and their transition rates from temporary into indefmite employment status appears quite low, having fallen signiflcantly over fue period 1987-1995.