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An analysis of the length of labour and financial contracts: a study for Spain

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Abstract:

This study investigates the connection between the duration of financial contracts and that of labour contracts. Workers with long–term contracts have incentives to invest in training. This makes them attractive to the entrepreneur. Furthermore, this behaviour will be reinforced if financial contracts are long–term, because it reduces the probability of an early liquidation as well as the dismissal of trained workers. As a conclusion, significant increases in the length of financing contracts should be accompanied by corresponding increases in the length of labour contracts. Support for this theoretical contention is found by testing it on a dataset composed of Spanish manufacturing firms for the period 1991–2000.

Document Type: Research Article

DOI: http://dx.doi.org/10.1080/00036840500081762

Affiliations: Department of Business Administration, Universidad Carlos III, C/ Madrid 126, Getafe 28903, Spain, Email: joatribo@emp.uc3m.es

Publication date: May 10, 2005

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