Temporary Agency Work and the Business Cycle

The Netherlands leads the world in the use of temporary agency workers: in 2000 nearly 5 per cent of Dutch employees were agency workers. The use of agency workers is very sensitive to business cycle fluctuations. This paper reports on an exploration of the relation between GDP and agency work. We developed a theoretical model for the time interdependence of GDP, agency work and regular employment, and tested model predictions using a VAR model. The results show that temporary agency work leads GDP development. A positive GDP shock is followed by an increase in the use of agency work for two years, but decreased use in the three subsequent years