The incidence of temporary employment in advanced economies: Why is Spain different?

This study analyses the determinants of the rate of temporary employment in 15 advanced economies using both macro-level data drawn from the OECD and EUROSTAT databases, as well as micro-level data drawn from the eighth wave of the European Household Panel. Comparative analysis is set out to test different explanations originally formulated for the Spanish case. The evidence suggests that the overall distribution of temporary employment in the analysed countries does not seem to be explicable by the characteristics of national productive structures. This evidence seems at odds with previous interpretations based on segmentation theories. As an alternative explanation, two types of supply-side factors are tested: crowding-out effects and educational gaps in the workforce. Both seem ill suited to explain the distribution of temporary work in the analysed economies. Institutional factors do, however, seem to play an important role. Multivariate analysis shows that the level of institutional protection in standard employment during the 1980s, together with the degree of coordinated centralization of the collective bargaining system, seem to have a significant impact on the distribution of temporary employment in the countries examined. Yet these institutional variables alone still fail to account for the Spanish difference. The Spanish puzzle seems, however, explicable when an interaction between employment protection in standard contracts and unemployment shocks is accounted for. This interaction is expected from a theoretical standpoint and proves consistent with both country-specific and comparative evidence.