Temporary agency work and the user firm's productivity: First evidence from German Panel Data

This paper investigates the relationship between the use of temporary agency work and the user firm's productivity. We hypothesise that modest use enhances numerical flexibility and thus productivity, while excessive use mirrors lowproductivity strategies utilising less social and human capital and primarily aims at circumventing labour market regulations. In contrast to the sparse existing literature on this issue, we apply a large panel data set and fixed effects techniques. We find a robust hump-shaped relationship between the extent of temporary agency work use and the user firm's productivity, which corroborates our hypotheses.