Temporary contracts and labour productivity in Spain: a sectoral analysis

This paper analyses the impact on sectoral labour productivity growth caused by the increase in the use of temporary employment contracts in Spain over the period 1987‐2000. With this aim, we estimate a production function model in which effective labour is represented by the shares of permanent, temporary and self-employed workers. Results suggest that productivity growth has been slowed down by the use of temporary contracts for regular jobs and that this has not been affected by compositional changes in activity over the period. However, this effect has only been detected in the manufacturing and energy sector, in contrast to low-technology low-human capital sectors like construction and hospitality.