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Temporary contracts and labour productivity in Spain: a sectoral analysis

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Abstract

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.

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Notes

  1. The new temporary contracts allow hiring employees to perform regular activities (whereas previous temporary contracts were mainly seasonal) and entail much lower dismissal costs than permanent contracts (see Dolado et al. 2002).

  2. Although the share of temporary contracts in total employment has been increasing in other European countries, these differences are striking in the context of EU-15 (see Booth et al. 2002a and OECD 2008, p. 53).

  3. The 2001 labour market reform contains restrictions on the successive use of temporary contracts, increases in fiscal support for the creation of jobs with new permanent contracts and transitory incentives to convert temporary contracts into permanent ones (OECD 2007, p. 52).

  4. This is an outstanding finding considering the tendency among new employees to have lower than average productivity (Treasury 2004, p. 54).

  5. This result is in line with that presented in the Spanish Economic Report of the President (2007) indicating that if the Spanish economy had maintained the productive structure it had in 1996, the relative decrease in productivity would have been restricted to an average of 0.1 percentage points.

  6. The average weights on GVA and total employment of each sector over the period 1987–2000 are presented in the following Table:

    Private non-agricultural sectors

    Sector

    Employment (%)

    GVA (%)

    M

    28.3

    30.8

    C

    13.3

    9.7

    H

    7.9

    7.9

    F

    11.9

    16.3

    O

    38.5

    35.3

    Total

    100.0

    100.0

    1. Sectors: Manufacturing and energy (M), Construction (C), Accommodation and catering (H), Financial intermediation, transport and communications (F) and Other market services (O)

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Acknowledgements

The authors wish to thank the editor, an associate editor and the referees for valuable comments that helped to substantially improve the paper. Financial support from the Centro de Estudios Andaluces (CentrA) is also gratefully acknowledged (grant ECOD1.05/036).

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Authors and Affiliations

  1. Universidad de Málaga, Malaga, Spain

    Bienvenido Ortega & Andrés J. Marchante

Authors
  1. Bienvenido Ortega
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  2. Andrés J. Marchante
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Correspondence to Bienvenido Ortega.

Appendix

Appendix

The data used was constructed using the following statistical documents:

  • Spanish Regional Accounts 1995 database (Spanish Institute of Statistics, INE).

  • Spanish Regional Accounts 1986 database; Linked series 1986–1996 (INE).

  • Active Population Survey (microdata, years from 1987 to 2000) (INE).

  • Capital stock in Spain and its regional distribution (1964–2002). BBVA Foundation.

In line with the European System of National Accounts (ESA-95) the Spanish Regional Accounts introduced a change in the concept of Total Employment and Gross Value Added (GVA). From 1995 onwards, data on employment refer to the number of jobs filled and not to the number of workers employed, and data on output refers to GVA at base prices and not to the GVA at factor cost, as was the case before. For this reason, from 1987 onwards a linked series was obtained for the number of jobs in each region and sector corresponding to salaried and non-salaried (self-employed) workers. This procedure has been also applied to estimate a linked series of Gross Value Added at factor cost (GVAfc), as the sum of Compensation of Employees and Gross Operating Surplus/Mixed Income for each year, sector and region.

Microdata from the Active Population Survey (APS) from the INE has also been used to estimate the share of workers with permanent and temporary contracts, the mean years of schooling of the workforce and the mean weekly hours worked by employees in each sector and region. Data relating to physical capital stock was calculated from the BBVA foundation database as the total capital stock of private sector activities minus the residential capital. The Gross Fixed Capital Formation (GFCF) comes from the same source. All the series are expressed in thousands euros at the 1990 value.

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Ortega, B., Marchante, A.J. Temporary contracts and labour productivity in Spain: a sectoral analysis. J Prod Anal 34, 199–212 (2010). https://doi.org/10.1007/s11123-010-0185-z

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