This paper presents a tractable model to explain the coexistence of temporary and permanent employment contracts. In our environment, workers are ex-ante heterogeneous and self-select into markets characterized by different labor contracts offered by firms. As a result, segmented labor markets...

Using the Survey of Income and Program Participation (SIPP) we estimate quarterly labor earnings risk across 21 industries of the US economy. We document a significant and positive association between earnings risk (both permanent and transitory) and average log-earnings across industries. The...