The Cyclicality of the Stepping-Stone Effect of Temporary Agency Employment

42 Pages Posted: 12 Mar 2018

See all articles by Elke J. Jahn

Elke J. Jahn

Institute for Employment Research (IAB); University of Bayreuth; IZA Institute of Labor Economics

Michael Rosholm

Aarhus University - Department of Economics and Business Economics; IZA Institute of Labor Economics; Amternes og Kommunernes Forskningsinstitut (AKF)

Abstract

This paper investigates whether the stepping-stone effect of temporary agency employment varies over the business cycle. Using German administrative data for the period 1985-2012 and an estimation framework based on the timing-of-events model, we estimate in-treatment and post-treatment effects and their relationship to the aggregate unemployment rate. We find evidence of a strong lock-in effect of agency employment, particularly in tight labor markets.This suggests that firms do not use agency employment as a screening device when unemployment is low. Moreover, the positive post-treatment effect is noticeably larger in periods of high unemployment, indicating that workers might be activating networks they established while in treatment. We further document that the matching quality in terms of earnings improves for those leaving unemployment directly from agency employment. This gain is higher when unemployment is low.

Keywords: temporary agency employment, stepping-stone effects, cyclicality, Germany

JEL Classification: C41, J40, J64

Suggested Citation

Jahn, Elke J. and Rosholm, Michael, The Cyclicality of the Stepping-Stone Effect of Temporary Agency Employment. IZA Discussion Paper No. 11377, Available at SSRN: https://ssrn.com/abstract=3137508

Elke J. Jahn (Contact Author)

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

University of Bayreuth ( email )

Bayreuth, 95447
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Michael Rosholm

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V
Denmark
+45 89 42 15 59 (Phone)
+45 86 13 63 34 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Amternes og Kommunernes Forskningsinstitut (AKF)

Nyropsgade 37
Copenhagen, DK-1602
Denmark

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