Workers and Firms Sorting into Temporary Jobs

Authors


  •  Corresponding author: Fabio Berton, Università del Piemonte Orientale, via Cavour 84–15121 Alessandria, Italy. E-mail: fabio.berton@sp.unipmn.it.

  •  We thank David Card, Dalit Contini, Francesco Devicienti, Lia Pacelli, the seminar participants at the XXI AIEL Conference, at the Ph.D. workshops held at the Collegio Carlo Alberto in 2006 and 2007 and at the workshop ‘Increasing labor market flexibility–Boon or Bane?’ held in Nuremberg in 2011 and two anonymous Referees of Economic Journal for helpful comments and suggestions, and Roberto Quaranta for assistance on Whip data. Fabio Berton partly developed this research while visiting the Center for Labor Economics at the University of California at Berkeley and with financial support from the CRT Foundation and from the Collegio Carlo Alberto through the project ‘Causes, processes and consequences of flexicurity reforms in the European Union: lessons from Bismarckian countries’. Pietro Garibaldi is also affiliated with CEPR, IZA and Fondazione de Benedetti.

Abstract

The liberalisation of temporary contracts has led to a sizeable share of jobs covered by temporary contracts. This article proposes a matching model of unemployment in which temporary (fixed-term) and permanent (open-ended) jobs coexist in a long-run equilibrium. From the labour demand standpoint, the choice of the type of contract leads to a trade-off between an ex-ante speed of hiring and an ex-post flexible dismissal rate. Empirically, we test with Italian longitudinal data whether non-employment spells that lead to a temporary job are shorter on average. The empirical evidence strongly supports our theoretical prediction.

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