Fixed-term contracts and the dynamics of labour demand

We estimate a model of labour demand that accounts for dynamics arising from the relative costs of hiring and firing workers on either indefinite-term contract (ITC) or fixed-term contract (FTC). We use a panel of 1000 French firms, for which we can measure the number of entries and exits for each type of contract between 1988 and 1992, Our estimates suggest that (1) it is much more costly to lay off workers under ITC than to hire them; (2) it is much less costly to adjust the number of FTC than to adjust the number of ITC; (3) the asymmetry between hiring and lay off costs is more important for non-production than for production workers. (C) 2001 Elsevier Science B.V. All rights reserved, JEL classification: J23; J30; D21.