Does dual employment protection affect TFP? : evidence from Spanish manufacturing firms
Title: Does dual employment protection affect TFP? : evidence from Spanish manufacturing firms
Citation: Journal of the Spanish economic association (SERIEs), 2016, Vol. 7, No. 4, pp. 421-459
This paper analyzes howchanges 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.
Creative Commons Attribution license. Received: 12 October 2015 / Accepted: 3 November 2016 / Published online: 15 November 2016. This article is published with open access at Springerlink.com
Type of Access: openAccess