Do Temporary Workers Receive Risk Premiums? Assessing the Wage Effects of Fixed-Term Contracts in West Germany by a Matching Estimator Compared with Parametric Approaches

The wage effects of fixed-term contracts (FTCs) are analysed with the German Socio-Economic Panel (GSOEP) for West Germany. Taking selection on observables into account results in an estimated wage effect of -6 percent up to -10 percent. Controlling additionally for selection on unobservables leads to wage effects of -23 percent, which may be explained by self-selection of workers. The results also highlight the importance of asymmetric information as an explanation for the incentive for employers as well as workers to enter FTCs