Resumo: This research focuses on analyzing the effect of high employment temporality on technical efficiency and productivity. Previous literature points out a set of benefits and drawbacks related to fixed-term contracts. To ascertain the influence of temporality on efficiency, the critical case of the hotel sector in the Canary Islands is studied where the temporary employment rate (40%). So this paper explores the effect of temporary employment on technical efficiency in the hotel sector of the Canary Islands (a Spanish region). The magnitude of this case study can be clearly checked, given that the Canary Islands is the most popular region in the European Union visited by residents. A production stochastic frontier is estimated by distinguishing between two types of employment: permanent and temporary. Results suggest that high levels of temporality tend to reduce technical efficiency and productivity. A high conversion rate from temporary to permanent jobs seems to increase efficiency. The contribution of this paper is threefold: (i) filling the gap in the literature on the influence of temporary employment on technical efficiency, evaluating its effect for a case study where job temporality is dramatically high, (ii) partial factor productivities for permanent and fixed-term workers are estimated, and (iii) exploring the influence of less studied variables like the level of conversion from fixed-term to permanent employment on efficiency. The findings can be relevant for human resources management for firms where temporary rates are high. Human resource management should consider the type of labor contracts used, as well as the perspectives of conversion into permanent ones for their temporary workers, given their potential influence in technical efficiency, labour productivity, and firm performance.
