Fixed-term Contracts and the Duration Distribution of Unemployment

• Authors: Maia Güell.
• BSE Working Paper: 110578 | September 15
• Keywords: cross-sectional data , duration model , turnover
• JEL codes: C41, J63, J64
• cross-sectional data
• duration model
• turnover

In the mid-1980s, many European countries introduced fixed-term contracts. This paper studies the possible implications of such reforms for the duration distribution of unemployment. I estimate a parametric duration model using cross-sectional data drawn from the Spanish Labor Force Survey from 1980 to 1994 to analyze the probability of leaving unemployment before and after the introduction of fixed-term contracts. I found that the difference in the probability of leaving unemployment between the short and long term unemployed increased after this reform. Semi-parametric estimation of the model also shows that for long spells, the probability of leaving unemployment decreased between the mid-1980s and the early 1990s.