Short-Term Contract Variance Dilution
RCTClinical Trial
High turnover and short durations in temporary contract flows introduce extreme statistical variance that masks genuine intervention impacts on long-term firm employment creation.
Picture this
Imagine trying to hear a quiet melody in a room where people are constantly popping bubble wrap. The loud, random pops obscure the steady musical notes, making it impossible to detect whether the music played louder or softer unless you filter out the background noise.
What the evidence says
Fixed-term and temporary contracts of 1 week or less comprised 53% of all contract flows, generating a standard deviation of hiring 9.9 times larger than permanent contracts and obscuring overall hiring treatment effects.
- Who was studied
- N = 7,438 small and medium enterprise establishments in France.
- How
- Stratified Randomized Controlled Trial analyzing administrative hiring declarations across fixed-term, temporary, and permanent contracts.
What to do
Isolate permanent contract hires or restrict evaluation windows to contracts exceeding minimum threshold durations when assessing active labor market policy impacts.
From the source
"For example, roughly 53% of all flows concern fixed or temp contracts of a week or less. Not surprisingly, the standard deviation of hires over all contracts is 9.9 times as large as that of permanent contracts. This obviously inhibits our ability to detect a significant effect on overall hiring as the impact on permanent contract hires is diluted."
Are_Active_Labor_Market_Policies_Directed_at_Firms_Effective_Evidence.pdf