DP3264 Fixed-Term Contracts and the Duration Distribution of Unemployment

Author(s): Maia G├╝ell
Publication Date: March 2002
Keyword(s): cross-sectional data, duration model, turnover
JEL(s): C41, J63, J64
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=3264

In the mid-1980s, many European countries introduced fixed-term contracts. Since then their labour markets have become more dynamic. This Paper studies the implications of such reforms for the duration distribution of unemployment, with particular emphasis on the changes in the duration dependence. I estimate a parametric duration model using cross-sectional data drawn from the Spanish Labour Force Survey from 1980-94 to analyse the chances of leaving unemployment before and after the introduction of fixed-term contracts. I find that duration dependence has increased since such reform. Semi-parametric estimation of the model also shows that for long spells, the probability of leaving unemployment has decreased since such reform.