Productivity in German manufacturing firms: Does fixed‐term employment matter?

Using a large data set of German manufacturing establishments and various panel data models, the authors investigate the relationship between labour productivity and the use of fixed‐term employment, taking account of the possible distortions that may result from self‐selection into the use of fixed‐term contracts. Their empirical results provide no evidence for the expected inverse U‐shaped relationship between fixed‐term employment and labour productivity, and testing for a linear relationship leads to mostly negative coefficients that are only significant in a few specifications. Overall, their results thus indicate that there is no significant relationship between the use of fixed‐term contracts and labour productivity.