LANDING A PERMANENT CONTRACT IN SPAIN: DO JOB INTERRUPTIONS AND EMPLOYER DIVERSIFICATION MATTER?*

Abstract

A discrete-time multivariate hazard model with state-specific unobserved heterogeneity is applied to investigate whether an individual's employment history conditions her chances of eventually obtaining a stable position in a labour market characterized, like the Spanish one, by high levels of employment protection for permanent contracts. This paper highlights the relevance of taking into account whether or not the worker remains in the same firm when accumulating temporary contracts to test for the stepping stone effect of these contracts. My analysis focuses on a sample of Spanish labour market entrants aged between 18 and 28 for the 2000–7 period. The results suggest that firms sometimes use temporary contracts as a screening device, thereby raising the entrance rates into permanent contracts among those in their initial hiring pool. In other cases, however, workers may become ‘trapped’ in the temporary employment bracket after several months of recurrent temporary contracts between bouts of unemployment under the same employer causing a drop in their chances of obtaining stable work. By contrast, moving from one firm to another as a temporary worker might have a positive influence on exit rates to permanent employment.