The Use of Fixed-Term Contracts and the (Adverse) Selection of Public Sector Workers

Abstract

The paper seeks to investigate the relationship between job (in)security in the public sector and workers' self-selection between the private and public sector. Using data from the Italian Labour Force Survey for the years 2005-13, I show that a higher incidence of fixed-term contracts in the public sector has significant adverse selection effects in that it lowers the likelihood of workers of higher ability entering the public sector. Moreover, at least in some areas of the country, a lower relative probability of obtaining an open-ended position in the public sector decreases the likelihood that higher-ability, fixed-term workers remain in the public sector.