Financing Constraints and Fixed-term Employment Contracts: Evidence from the 2008-2009 Financial Crisis

Ana Fernandes and Priscila Ferreira ()
Authors registered in the RePEc Author Service: L. Alan Winters

No 58, NIMA Working Papers from Núcleo de Investigação em Microeconomia Aplicada (NIMA), Universidade do Minho

Abstract: This paper investigates the effects of financing constraints on employment decisions of firms, when it is possible to choose between permanent and fixed-term workers. We use linked employer-employee data for the universe of private sector firms in Portugal, and the 2008-09 financial crisis as a shock for identification. We find that firms in sectors that intrinsically rely more on external finance increased the share of fixed-term employment and hires after the crisis, while the effect for firms with wider access to buyer-supplier credit is relatively lower. At the worker level, workers in sectors that require significant external financing are more likely to be hired with a fixed-term contract after the crisis, while those in sectors that have wider access to supplier credit are less likely. Our results suggest that the crisis induced financially constrained firms to use the more flexible fixed-term contracts more intensively. Credit from suppliers alleviated this effect by potentially providing an alternative source of funds to credit from financial institutions.

Keywords: Financial crisis; Credit constraints; Employment; Fixed-term Contracts (search for similar items in EconPapers)
JEL-codes: G20 J2 J41 M51 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2015-07
New Economics Papers: this item is included in nep-eur and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in European Economic Review, February 2017, Volume 92, pages 215-238

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DOI: 10.1016/j.euroecorev.2016.12.009

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