In 1990 a reform in Italy has modified the employment protection legislation for employees of small firms (with fewer than 16 employees) making much more costly for firms to dismiss workers, while leaving unchanged the employment protection in large firms. Using a sample of administrative data (WHIP) from National Institute of Social Security we compare absenteeism rates (used as a proxy of shirking) in small and in large firms in the years just before (1989) and after (1991) the reform, with a difference-in-differences estimator. In line with theoretical predictions, we find a strong increase (around 18%) in shirking of workers employed in small firms after the increase in dismissal costs. This finding is robust to alternative definitions of small firm and to different time periods.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
16694.
Find related papers by JEL classification: J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts M51 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Firm Employment Decisions; Promotions J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
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