The Effect of Temporary Employment on Labour Market Outcomes

Daniela Piazzalunga , FBK-IRVAPP
Enrico Rettore, University of Trento

We evaluate the causal impact of temporary contracts on future labour market outcomes versus both a spell of unemployment and a spell of permanent employment over the period 2007-2016, using the panel of the Italian Labour Force Survey. We identify the causal effect imposing that, conditional on a suitable set of observable characteristics, the treatment status (temporary job) is ignorable for the outcome, and we build a backward test to validate the ignorability assumption. Then, we propose a new methodology to estimate the remaining selection bias due to the omission of a known variable. Results indicate that experiencing a spell of temporary work instead of a spell of unemployment increases the probability of being employed after twelve months by 35 percentage points; it increases the probability of having a permanent contract by 7.3 p.p. and the probability of having a satisfactory job by 5.7 p.p. Individuals who had a temporary contract work also work longer and earn more. Instead, workers who experience a spell of temporary work rather than a spell of permanent work are less likely to be employed 12 months later (-5 p.p.) and to have a permanent contract (-40 p.p.); they earn less and are also less satisfied. The backward test indicates that large part of the selection bias is eliminated thanks to our estimation strategy, but not all of it; however, our sensitivity analysis suggests that even accounting for the remaining selection bias, the different outcomes between the two groups would remain large and significantly different from zero.

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 Presented in Session P3. Poster Session Migration, Economics, Environment, Methods, History and Policy