In the mid-1980s, many European countries introduced fixed-term contracts. Since then their
labor markets have become more dynamic. This paper studies the possible implications of
such reforms for the duration distribution of unemployment. I estimate a parametric duration
model using cross-sectional data drawn from the Spanish Labor Force Survey from 1980 to
1994 to analyze the probability of leaving unemployment before and after the introduction of
fixed-term contracts. I find that the difference in the probability of leaving unemployment
between the short and long term unemployed increased after this reform. Semi-parametric
estimation of the model also shows that for long spells, the probability of leaving
unemployment decreased between the mid-1980s and the early 1990s.
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