Short Notice, Big Difference? The Effect of Temporary Employment on Firm Competitiveness across Sectors

Abstract

This paper is one of the first to examine how the use of fixed-term employment contracts (FTCs) affects firm competitiveness (i.e. productivity, wages and profits) while controlling for key econometric issues such as time-invariant unobserved workplace characteristics, endogeneity and state dependence. We apply dynamic panel data estimation techniques to detailed Belgian linked employer-employee data covering all years from 1999 to 2010. Results show that the effects of FTCs on firm competitiveness vary across sectors: while temporary employment is found to enhance productivity and profits in (labourintensive) services, this is not the case in manufacturing and construction. AbstractThis paper is one of the first to examine how the use of fixed-term employment contracts (FTCs) affects firm competitiveness (i.e. productivity, wages and profits) while controlling for key econometric issues such as time-invariant unobserved workplace characteristics, endogeneity and state dependence. We apply dynamic panel data estimation techniques to detailed Belgian linked employer-employee data covering all years from 1999 to 2010. Results show that the effects of FTCs on firm competitiveness vary across sectors: while temporary employment is found to enhance productivity and profits in (labour-intensive) services, this is not the case in manufacturing and construction.

Does education raise productivity and wages equally? The moderating role of age and gender

“…It is now standard in the literature on the productivity and wage effects of labour heterogeneity (see e.g. Cardoso et al 2011;Devicienti et al (2017);Garnero et al 2014;Giuliano et al 2017;Göbel and Zwick 2012;Ilmakunnas and Maliranta 2005;Mahlberg et al 2013;Nielen and Schiersch 2014). …”

“…Cardoso et al 2011;Garnero et al 2014;Giuliano et al 2017;Devicienti et al 2017;Göbel and Zwick 2012;Hellerstein et al 1999a;Nielen and Schiersch 2014;van Ours and Stoeldraijer 2011). 3 For a detailed description of how some of the prominent theories on mismatches between productivity and wages can be adapted to account for workers' educational heterogeneity, see Rycx et al (2015).…”

“…Accordingly, many papers rely on the dynamic generalised method of moments (GMM) to estimate the impact of workforce and job characteristics on productivity and/or labour costs (see e.g. Cardoso et al 2011;Giuliano et al 2017;Göbel and Zwick 2012;Mahlberg et al 2013;Nielen and Schiersch 2014;van Ours and Stoeldraijer 2011).…”

Fixed or open-ended? Labor Contracts and Productivity in the Colombian Manufacturing Sector

“…Giuliano et al (2017), while not finding any significant effect of hiring through fixed-term contracts on firm competitiveness in the Belgian manufacturing sector, observe a positive and significant effect on labor productivity in services, which they attribute to some service subsectors being more labor intensive, in need of less sophisticated technology and less able to create stocks. Finally, Eslava et al (2014) find that in Colombia the use of temporary contracts is associated with higher firms' productivity, particularly in businesses with lower skill needs.…”

“…In the OECD, there have been proposals to replace dual labor markets with a single open-ended contract, 33 where termination costs that increase smoothly with job tenure allow the gains of both fixed-term and permanent contracts 33 In Spain, Italy, and France. (Blanchard and Tirole, 2003, Boeri and Garibaldi 2008, Dolado 2012, Bentolila et al 2012b, Cahuc 2012, OECD 2014, IMF 2014, 2015, 2017. Due to the low degree of employment protection in the initial period, this instrument can be used as a screening device, but as employment protection becomes more stringent with job tenure, it also serves as an incentive for plants to invest in training for all workers and search for the right matches.…”