Flexibility, Dual Labour Markets, and Temporary Employment. Empirical Evidence from German Establishment Data

The study examines, what forms and instruments firms use to react flexibly to demand-induced output fluctuations, and, if they are used in a complementary or substitutable way. Empirical evidence shows a rather complementary relationship. Moreover, the determinants of temporary employment (fixed-term contracts and temporary agency work) and the impact of these flexible employment forms on job security and job stability of regular employment are analyzed. One result is that positive developments of sales covary with a higher probability and more wide-spread use of temporary employment, which concurs with dual labour market theory. But estimations for job security and job stability indicate that temporary employment does not lower the number of layoffs and quits as is proposed by the core-periphery hypothesis.