Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform

Arbeitspapier

Fixed-term contracts (FTCs) may be an important tool to promote employment, particularly in recessions or when permanent contracts are costly. Therefore, it may be useful to vary some of the legal parameters of FTCs over the business cycle, namely increasing their flexibility during downturns. We evaluate this idea by examining the effects of a 2011 law that increased the maximum duration of FTCs in Portugal, in the midst of a recession. Our analysis is based on regression-discontinuity (and difference-in-differences) methods and linked panel data. We find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Worker churning is reduced significantly, as mobility of eligible fixed-term workers to other firms drops by 10%. Employment also increases significantly for younger workers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: GLO Discussion Paper ; No. 101

Classification and Topics

• Classification: Wirtschaft ; Labor Demand ; Labor Contracts ; Labor Turnover; Vacancies; Layoffs
• Subject: Employment law ; worker mobility ; segmentation ; counterfactual evaluation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martins, Pedro S.
• Event: Veröffentlichung
• (who): Global Labor Organization (GLO)
• (where): Maastricht
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/167612
• Last update: 10.03.2025, 11:44 AM CET