Conditions of Work and Employment Series No. 77

Firms' demand for temporary labour in developing countries: Necessity or strategy?

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.