Using data on private sector firms in developing countries, this paper investigates the determinants of firms' recourse to temporary labour. We find that there are two types of firms: those that do not use temporary labour, and those that do. Among the latter, some firms use temporary labour very intensively, suggesting that they may strategically organize their production processes around this type of employment relationship. These firms are different from others in their characteristics but also in their reasons for employing temporary labour. At the same time, our main findings suggest that, for all firms in developing countries, the key factors affecting demand for temporary labour are firm expansion and the regulations authorising the use of temporary labour for permanent tasks. Other employment protection legislation provisions have a limited and different effect, depending on the type of firm.

Abstract Acknowledgements Tables and Figures 1. Introduction 2. Literature review and hypothesis setting 2.1 The flexibility argument 2.2 Cost advantages 2.3 Technological change 2.4 Moderate v. intensive use of temporary labour 3. Data description 4. Descriptive statistics 5. Empirical setting and result 5.1 Specifications 5.2 Micro level determinants of firms’ use of temporary labour 5.3 Macro level determinants of firms’ use of temporary labour 5.4 Robustness of the results 5.5 Modelling the firm decision-making process 6. Conclusions References Annex Conditions of Work and Employment Series