Fixed-term employment and job satisfaction:Evidence from individual-level data accounting forselectivity bias

The present paper examines the relationship between fixed-term employment and jobsatisfaction using individual-level data from the German Socio Economic Panel (GSOEP).According to theoretical expectations, fixed-term employment should be associated with arelative low level of job satisfaction, and the majority of empirical investigations is actually inline with this prediction. However, none of these studies accounts for the fact that a worker’schoice of whether or not to accept a temporary working contract might substantially be drivenby individual characteristics and would then be endogenous. In contrast to prior studies, ourpreferred model specification explicitly accounts for a potential selectivity bias. Theestimation results of our treatment effects model indicate a positive connection between fixedtermemployment and job satisfaction. Hence, we conclude that job satisfaction on average isnot negatively affected by the pure duration of an employment contract, but by individualcharacteristics, job-related factors, and working conditions. Nevertheless, we would notrecommend firms to replace permanent by fixed-term workers as the latter are more satisfiedwith their jobs associated with higher motivation and productivity levels. Instead, firms areencouraged to improve working conditions, especially for better educated and more tenuredworkers.