Productivity, wages and profits among Belgian firms: do fixed-term contracts matter? Available to Purchase

– The purpose of this paper is to estimate the impact of fixed-term contracts (FTCs) on labour productivity, wages (i.e. labour cost), and productivity-wage gaps (i.e. profits).

– The authors apply dynamic panel data techniques to detailed Belgian linked employer-employee panel data covering the period 1999-2006.

– Results indicate that FTCs exert stronger positive effects on productivity than on wages and (accordingly) that the use of FTCs increases firms’ profitability.

– This paper is one of the first to examine the FTC-productivity-wage nexus while addressing three important methodological issues related to the state dependency of the three explained variables, to firm time-invariant heterogeneity, and to the endogeneity of FTCs.