Which firms create fixed-term employment? Evidence from Portugal

We study net job creation in Portugal using matched employer-employee data with information on both contract type and firm age. Young firms, particularly startups, are an important source of job creation and that creation occurs in large part through fixed-term contracts. In contrast, most job destruction is due to small older firms that tend to use open-ended contracts. We also find that the share of fixed-term contracts increased substantially between 2002 and 2007 and that this increase was driven mainly by each successive cohort of startups. The severely deteriorating business climate in Portugal starting in the early 2000s coincides with the increased use of fixed-term contracts by firms. Our findings suggest that job creation in Portugal operates similarly as in the U.S. (Haltiwanger et al., 2013).