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The Determinants for Labour Contract Length. A French Micro-Econometric Study

Two types of analyses intend to explain the determinants of labour contracts length. A first analysis emphasizes on the contracting costs and the level of uncertainty. The second analysis focuses on the incentive and selection effect of the contract length. This paper test the determinants for contract duration by means of econometric duration models. The estimates are carried out from French data called 'Trajectoires des Demandeurs d'Emploi' (TDE), conducted by the Research Direction of Employment Ministry (DARES). An econometric treatment of the endogeneity of the labour contract status (indefinite-term contract (ITC fixed-term contract (FTC), temporary contract (TC)) and unobservable heterogeneity is carried out. Our results show that wages positively affect employment duration. This confirms the positive effect of contracting costs reported. Moreover, staying in a firm more than two years increases the length of the next contract.