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Employment protection and fertility: Evidence from the 1990 Italian reform

  • Prifti, Ervin
  • Vuri, Daniela

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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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 23 (2013)
Issue (Month): C ()
Pages: 77-88

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Handle: RePEc:eee:labeco:v:23:y:2013:i:c:p:77-88
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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