Job security provisions, particularly those regarding workers' layoffs, are commonly invoked to explain the large and persistent differences between European and U.S. unemployment rates. European countries have undertaken reforms in the last two decades aimed at reducing firing costs. This reduction has typically been applied only to fixed-term contracts. Despite the widespread use of such contracts, there is a lack of quantitative analysis of their impact over the aggregate economy. We build and calibrate a dynamic general equilibrium model with heterogeneous agents in a firing-cost economy. The parameters of our calibration are estimated using a dynamic partial equilibrium model with a panel of firm-level Spanish data. We find that the introduction of temporary contracts have small and negative effects on aggregate output and employment. These findings suggest that reforms other than relaxing firing restrictions are needed to reduce European unemployment.