Limited Duration Employment Eric Smith Department of Economics University of Essex Wivenhoe Park Colchester, Essex CO4 3SQ ENGLAND esmith@essex.ac.uk November 2006 Abstract This paper analyses a matching model in which labor market participants use explicitly speciﬁed ﬁnite duration employment as a waiting station be- tween searches. Searchers entering the market see all available options. The best match, however, may not be particularly productive. Since all currently available traders are known, immediate search is not worthwhile. Over time, turnover replenishes the stock of potential traders and poor matches even- tually ﬁnd it proﬁtable to search again. Searchers therefore take the best available match and simultaneously formulate if and when to look again. The best matches become permanent; lower quality matches coexist as ﬁxed- term employment. This duration increases with match quality and declines as matching improves. JEL Classiﬁcation: J63, J64 Keywords: Search and matching, employment duration, temporary jobs, job turnover 1