The Effect of Product Market Competition onJob Instability

This paper assesses the impact of product market competition on job instability as proxied bythe use of fixed-term labor contracts. Using both worker data from the Spanish Labor ForceSurvey and firm data from the Spanish Business Strategies Survey, I show that job instabilityrises with competition. In particular, a one standard deviation increase in competition in aneconomic sector decreases the probability that a fixed-term worker gets an open-endedcontract within that sector in a given year by more than 30%. The effect is identified bymeans of exogenous shifts in competition brought about by changes in legislation....