A Model for the Temporary Help Services Industry in the Presence of Unemployment: Theoretical and Em

The temporary help services (THS) industry has experienced an impressive growth, representing 16% of temporary hiring in Spain. At the same time it exhibits a remarkable regional disparity. The main purpose of this paper is to develop an appropriate theoretical model for analysing the THS phenomenon in the presence of unemployment. In addition, this study examines the Spanish case, using proxy variables and panel data methodology. The paper concludes that the fixed cost of hiring is an essential factor to explain the growth of this business and regional discrepancies. In particular, it is stated that the sectorial composition for provinces (proxy variable for the hiring costs) constitutes a major factor in determining the proportion of temporary contracts formalised through THS firms.