Aguirregabiria, VíctorAlonso-Borrego, César2015-05-192014-04Aguirregabiria, V. y Alonso-Borrego, C. “Labor contracts and flexibility: evidence from a labor market reform in Spain", Economic Inquiry, April 2014, v. 52, n. 2, pp. 930-9570095-2583https://hdl.handle.net/10016/20757This paper evaluates the effects of a labor market reform in Spain that removedrestrictions on fixed-term or temporary contracts. Our empirical results are based onlongitudinal firm-level data that cover observations before and after the reform. Weposit and estimate a dynamic labor demand model with indefinite and fixed-term laborcontracts, and a general structure of labor adjustment costs. Experiments using theestimated model show important positive effects of the reform on total employment(i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanentby temporary workers (i.e., a 10% decline in permanent employment). The effects onlabor productivity and the value of firms are very small. In contrast, a counterfactualreform that halved all firing costs would produce the same employment increase as theactual reform, but much larger improvements in productivity and in the value of firms.application/pdfeng© WileyJob security provisionsEmployment protectionTemporary jobsFiring costsDemandModelsAdjustmentTurnoverFranceFlowsresearch articleJ23J32J41Economía10.1111/ecin.12077open access9302957Economic Inquiry52AR/0000014197