The effect of product market competition on job security

Abstract

This paper studies the impact of product market competition on job security. I use differences between types of labor contracts to measure job security. The effect of competition on the use of different types of labor contracts is identified by changes in legislation that lead to exogenous shifts in competition. Using both worker data from the Spanish Labor Force Survey and firm data from the Spanish Business Strategies Survey, I show that job security decreases with competition. A one standard deviation increase in competition decreases the probability that a worker switches to a more secure labor contract by at least 22%.