Workers and Firms Sorting into Temporary Jobs

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 (fixedterm) 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 nonemployment spells that lead to a temporary job are shorter on average. The empirical evidence strongly supports our theoretical prediction.[ F125 ] 1 In Cahuc and Postel Vinay (2002) temporary and permanent contracts coexist in light of a random and exogenous state permission to fill jobs with temporary contracts. In Blanchard and Landier (2002) all jobs start with a temporary contract and only a fraction is endogenously converted into a permanent job. Garibaldi and Violante (2005) have similar implications. In a more recent article, Cahuc et al. (2012) show that permanent and temporary contracts coexist in a search market with random matching and wage bargaining. With respect to the research of this article, the model by Cahuc et al. does not imply that the job finding rate for temporary workers are larger than the job finding rate for open-ended contracts.2 A similar implication, at least from the labour supply standpoint, emerges in the quantitative general equilibrium model proposed by Alonso-Borrego et al. (2005). The free entry condition in both markets, a key feature of the mechanism of this study, is anyway not modelled by Alonso-Borrego et al.

Dual employment protection and (lack of) on-the-job training: PIAAC evidence for Spain and other European countries

“…The novel result in relation to Berton and Garibaldi (2012) is that, while T upp increases with F, T low decreases. Thus, for given T , it is more likely that firms will only provide training to workers under permanent contracts in dual labor markets (where F is large), than in more unified labor markets (where F is smaller).…”

“…Berton and Garibaldi (2012) argue that this wage setting is in the spirit of Hall (2005) whereby any wage within the parties' bargaining set at the time of job creation can be supported as an equilibrium. To make the problem interesting we follow these authors in assuming that w p = w t = w, andz < w < y, so that all workers participate in the labor market and, to capture no discriminatory rules for workers in different submarkets, wages are set to be the same.…”

“…The main hypothesis and empirical strategy can be motivated by a search and matching model for a dual labor market in the spirit of Berton and Garibaldi (2012), who rationalize the co-existence of permanent and temporary workers in steady-state. A key 5 These training sessions are characterized "by planned periods of training, instruction or practical experience, using the normal methods of work."…”

“…In our stylized model, inspired by Berton and Garibaldi (2012)'s search and matching model of a dual labor market, there is mass one of risk-neutral workers who actively search for a job when unemployed. Workers differ in their (time-invariant) flow utility being unemployed, denoted by z which is not observable to firms and is drawn from a continuous c.d.f.…”

Wage Incentive Profiles in Dual Labor Markets

“…Berton and Garibaldi (2012) suggest that the equilibrium ratio of temporary to permanent contracts can be driven by the trade-off faced by firms between an ex-ante slower job filling rate and an ex-post more flexible dismissal rate 3 . Differently, Wasmer (2001) points 2 One would expect wage compensating differentials to work for jobs with higher unemployment risk in order to become sufficiently attractive (Rosen, 1986).…”