Reforming Dual Labor Markets: “Real” or “Contractual” Temporary Rates?

Abstract

This paper examines the impact of Spain's 2021 labor reform on job creation, job destruction, and employment duration using new, comprehensive daily administrative data. The reform's primary objective was to reduce the rate of nominal (i.e., contractual) temporary employment. Although the reform succeeded in lowering the incidence of temporary contracts in a dual labor market, the evidence indicates that overall employment stability—as measured by job duration—and short-term employment transitions (i.e., real or empirical temporary employment) have not experienced significant improvement, either across the economy or within specific industries.