Stepping-stones or dead-ends? An analysis of Swedish replacement contracts

The paper studies if temporary jobs in the form of fixed-term replacement contracts reduce the risk of future unemployment among job-seekers. Using exact matching on labour market history and personal characteristics we find positive effects of the replacement contract on future labour market status. We also find that the longer the replacement contract the higher the probability of having an open ended contract at the same site 2–2.5 years after the start of the contract. No effect of the length is found on unemployment, employment or wages. Overall, the results suggest that receiving a fixed term contract reduces the risk of future unemployment, and that a longer contract increases the position within the workplace but not on the market in general.

Keywords: Unemployment, Temporary employment, Matching.
JEL-Code: J64