Fixed-term and permanent employment contracts: Theory and evidence

Arbeitspapier

This paper constructs a theory of the coexistence of fixed-term and permanent employment contracts in an environment with ex ante identical workers and employers. Workers under fixed-term contracts can be dismissed at no cost while permanent employees enjoy labor protection. In a labor market characterized by search and matching frictions, firms find it optimal to discriminate by offering some workers a fixed-term contract while offering other workers a permanent contract. Match-specific quality between a worker and a firm determines the type of contract offered. We analytically characterize the firms' hiring and firing rules. Using matched employer-employee data from Canada, we estimate the wage equations from the model. The effects of firing costs on wage inequality vary dramatically depending on whether search externalities are taken into account.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 2010-13

Classification and Topics

• Classification: Wirtschaft ; Taxation and Subsidies: Other ; Labor Demand ; Wages, Compensation, and Labor Costs: Public Policy ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: employment protection ; unemployment ; dual labor markets ; wage inequality ; Befristeter Arbeitsvertrag ; Arbeitsverhältnis ; Arbeitsmarkttheorie ; Matching ; Dualer Arbeitsmarkt ; Lohnstruktur ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cao, Shutao ; Shao, Enchuan ; Silos, Pedro
• Event: Veröffentlichung
• (who): Federal Reserve Bank of Atlanta
• (where): Atlanta, GA
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/70625
• Last update: 10.03.2025, 11:45 AM CET