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Can Fixed-Term Contracts Put Low Skilled Youth on a Better Career Path? Evidence from Spain

J. Ignacio García-Pérez, Judit Vall Castelló, Ioana Marinescu

NBER Working Paper No. 22048
Issued in February 2016
NBER Program(s):Labor Studies, Public Economics

By reducing the commitment made by employers, fixed-term contracts can help low-skilled youth find a first job. However, the long-term impact of fixed-term contracts on these workers’ careers may be negative. Using Spanish social security data, we analyze the impact of a large liberalization in the regulation of fixed-term contracts in 1984. Using a cohort regression discontinuity design, we find that the reform raised the likelihood of male high-school dropouts working before age 19 by 9%. However, in the longer run, the reform reduced number of days worked (by 4.5%) and earnings (by 9%).

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Document Object Identifier (DOI): 10.3386/w22048

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