This paper analyzes how changes in the firing-costs gap between permanent and temporary workers affect firms' TFP in a dual labour market. We argue that, under plausible conditions, firms' temp-to-perm conversion rates go down when this gap increases. Temporary workers respond to lower conversion rates by exerting less effort, while firms react by providing less paid-for training. Both channels lead to a decline in TFP. We test these implications in a large panel of Spanish manufacturing firms from 1991 to 2005, looking at the effects of three labour market reforms which entailed substantial changes in the firing-costs gap. Our empirical findings provide some support for the above-mentioned mechanism.

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This article provides evidence about the effect of innovation on employment in Argentina in the period 1998-2001. In particular, we quantify the effect of process and product innovations on employment growth and the skill composition. Our results show that: (1) Product innovations have a positive effect on employment growth biased toward skill labor; (2) Process innovations do not affect employment growth or composition; (3) There are no heterogeneous effects in technology intensity and size; (4) Most of the contraction in employment in this period was explained by noninnovators.

This paper studies the use of psychometric tests, designed by the Entrepreneurial Finance Lab (EFL), as a tool to screen out high credit risk and potentially increase access to credit for small business owners in Peru. We compare repayment behavior patterns across entrepreneurs who were offered a loan based on the traditional creditscoring method versus the EFL tool. We find that the psychometric test can lower the risk of the loan portfolio when used as a secondary screening mechanism for already banked entrepreneurs-that is, those with a credit history. The EFL tool can also allow lenders to offer credit to some unbanked entrepreneurs-that is, those without a credit history-who were rejected based on their traditional credit scores, without increasing the risk of the portfolio. JEL Classification: D82, G21, G32 I . I N T R O D U C T I O NGiven the important role that small and medium enterprises (SMEs) play in a healthy and dynamic economy, many studies have attempted to understand the factors that affect their creation and performance. 1 These studies show that SMEs face greater financial constraints than large firms and that these constraints could be one of the factors that limit their growth (