Employment contracts and effort: why do temporary workers take less absence?

There is growing evidence that the nature of employment contracts, in particular the degree of employment protection, affects worker effort. Using personnel data drawn from a large public sector labour force, we investigate whether, and through which channels, temporary employment contracts influence worker absence. Specifically, we focus on the role of risk of job loss and the availability of opportunities for conversion to permanent contracts. We demonstrate that a large proportion (68% to 69%) of the temporary-to-permanent absence differential can be explained by observable and unobservable individual and workplace characteristics. However, some contract specific effect on absenteeism cannot be accounted for. Risk of job loss and promotion opportunities have significant and separate effects on temporary workers' absence.