September 2006

IZA DP No. 2343: Do Changes in Regulation Affect Employment Duration in Temporary Work Agencies?

published in: Industrial and Labor Relations Review, 2009, 62 (2), 226-251

Over the past three decades Germany has repeatedly deregulated the law on temporary agency work by stepwise increasing the maximum period for hiring-out employees and allowing temporary work agencies to conclude fixed-term contracts. These reforms should have had an effect on the employment duration within temporary work agencies. Based on an informative administrative data set we use hazard rate models to examine whether the employment duration has changed in response to these reforms. We find that the repeated prolongation of the maximum period for hiring-out employees significantly increased the average employment duration while the authorization of fixed-term contracts reduced employment tenure.