"The paper takes issue with demand-based interpretations of the consequences of deregulation through temporary employment in Spain. According to demand-based accounts, the introduction of temporary contracts has helped to generate and maintain a secondary segment in the Spanish labour market, in which specific product market conditions generate a need for highly flexible contracts to perform low-skilled tasks. In contrast to this view, the paper argues that partial deregulation has also had important segmenting consequences amongst Spanish professionals, despite the high levels of asset specificity and monitoring costs involved in their job tasks. Drawing on the analysis of the Spanish Labour Force Survey for the period 1987–1997, the paper presents empirical evidence that shows how, when introduced in a context of high unemployment and high dismissal costs for the permanent workforce, temporary contracts can generate a process of polarization of employment chances within both manual and professional occupations. The segmenting consequences of partial deregulation have, therefore, been more severe, pervasive and pernicious than it is acknowledged by demand-based accounts."

Support: Digital