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Employment Protection and Fertility: Evidence from the 1990 Italian Reform

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  • Ervin Prifti
  • Daniela Vuri

Abstract

The aim of this paper is to investigate the effect of Employment Protection Legislation (EPL) on fertility decisions of Italian working women using administrative data. We exploit a reform that introduced in 1990 costs for dismissals unmotivated by a ‘fair cause’ or ‘justified motive’ in firms below 15 employees and left firing costs unchanged for bigger firms. We use this quasi-experimental setup to study the hypothesis that increased EPL reduces future job insecurity and positively affects a female worker’s proneness to take childbearing decisions. We use a difference in difference (OLS-DID) model to control for possible period-invariant sorting bias and an instrumental variable (IV-DID) model to account for time-varying endogeneity of the treatment status. We find that reduced economic insecurity following a strengthening of the EPL regime has a positive and sizable effect on fertility decisions of Italian working women. This result is robust to a number of checks regarding possible interactions with other policy reforms occurring around 1990, changes in the sample of workers and firms, and use of an alternative set of exclusion restrictions.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2012/wp-cesifo-2012-04/cesifo1_wp3805.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3805.

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Date of creation: 2012
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Handle: RePEc:ces:ceswps:_3805

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Keywords: fertility; employment protection; difference-in-difference; instrumental variables; policy evaluations;

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References

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  1. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  2. Pedro Mira & Namkee Ahn, 2001. "Job bust, baby bust?: Evidence from Spain," Journal of Population Economics, Springer, vol. 14(3), pages 505-521.
  3. Adriana Kugler & Giovanni Pica, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," NBER Working Papers 11658, National Bureau of Economic Research, Inc.
  4. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2006. "Understanding Instrumental Variables in Models with Essential Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 389-432, August.
  5. Emilia Del Bono & Daniela Vuri, 2008. "Job Mobility and the Gender Wage Gap in Italy," CEIS Research Paper 130, Tor Vergata University, CEIS, revised 06 Nov 2008.
  6. Mancini Massimo & Pappalardo Carmine, 2006. "Evaluating The Impact of Labour Market Regulation on the Size Growth of Italian Firms," Politica economica, Società editrice il Mulino, issue 3, pages 399.
  7. Emilia Del Bono & Massimiliano Bratti & Daniela Vuri, 2004. "New mothers’ labour force participation in Italy: the role of job characteristics," CHILD Working Papers wp05_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
  8. Leonardi, Marco & Pica, Giovanni, 2010. "Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation," IZA Discussion Papers 5335, Institute for the Study of Labor (IZA).
  9. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  10. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  11. Leonardi, Marco & Pica, Giovanni, 2007. "Employment protection legislation and wages," Working Paper Series 0778, European Central Bank.
  12. Alicia Adsera, 2005. "Vanishing Children: From High Unemployment to Low Fertility in Developed Countries," American Economic Review, American Economic Association, vol. 95(2), pages 189-193, May.
  13. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 1-19.
  14. Sara Rica & Amaia Iza, 2005. "Career Planning in Spain: Do Fixed-term Contracts Delay Marriage and Parenthood?," Review of Economics of the Household, Springer, vol. 3(1), pages 49-73, November.
  15. Schivardi, Fabiano & Torrini, Roberto, 2005. "Identifying the Effects of Firing Restrictions Through Size-Contingent Differences in Regulation," CEPR Discussion Papers 5303, C.E.P.R. Discussion Papers.
  16. Michaela Kreyenfeld, 2005. "Economic uncertainty and fertility postponement: evidence from German panel data," MPIDR Working Papers WP-2005-034, Max Planck Institute for Demographic Research, Rostock, Germany.
  17. Daniela Del Boca & Silvia Pasqua & Chiara Pronzato, 2004. "Employment and Fertility Decisions in Italy, France and the U.K," CHILD Working Papers wp08_04, CHILD - Centre for Household, Income, Labour and Demographic economics - ITALY.
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Cited by:
  1. Marco Leonardi & Giovanni Pica, 2013. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Economic Journal, Royal Economic Society, vol. 123(12), pages 1236-1278, December.

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