The Effect of Employing Temporary Workers on Efficiency: Evidence From a Meta-Frontier Analysis

Abstract

This study examines the impact of employing temporary workers on technical efficiency (TE) by employing stochastic frontier analysis (SFA) and meta-frontier analysis (MFA). These two statistical methods yield slightly different, yet empirically meaningful, results. SFA—the more conventional methodology for conducting efficiency analysis—confirms that firms with temporary workers show a somewhat lower level of TE; while MFA, which allows a comparison of TE across groups with heterogeneous technologies, reveals that firms hiring temporary workers are technologically less efficient and have a more pronounced relative gap in efficiency. With the application of MFA, it was observed that firms hiring only temporary workers come farther to the meta-frontier than their counterparts.