April 2012

IZA DP No. 6471: Identifying the Substitution Effect of Temporary Agency Employment

published in: Macroeconomic Dynamics, 2016, 20(5), 1264-1281

This paper fills a gap in the literature by investigating whether temporary agency employment substitutes regular employment. To take into account the interaction between the two employment forms, we identify a SVAR model with correlated innovations by volatility regimes. We show that a positive shock to temporary agency employment increases overall employment, but also leads to substitution of regular jobs.