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Should the maximum duration of fixed-term contracts increase in recessions? Evidence from a law reform
آیا حداکثر مدت قراردادهای مدت معین در رکود باید افزایش یابد؟ شواهدی از اصلاح قانون-2020 Fixed-term labour contracts (FTCs) may be an important tool to promote employment, particularly in
recessions and when dismissal costs of open-ended contracts are high. In this case, making FTCs more
flexible during downturns may be useful. We assess this idea by examining the effects of a law that
increased the maximum duration of FTCs in Portugal during the 2012 recession. Our analysis is based on
regression-discontinuity and difference-in-differences methods and employer-employee panel data. We
find a considerable take up of this measure, as conversions to permanent contracts drop by 20%. Worker
churning is reduced, as mobility of eligible fixed-term workers to other firms drops by 10%. Employment
also increases but only for younger workers.
Keywords: Employment law | Worker mobility | Labour segmentation | Policy evaluation |
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