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Employment Protection, Temporary Contracts and Firm-provided Training: Evidence from Italy

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Abstract

In this study, we leverage on Italy's size-contingent firing restrictions to identify the causal effect of employment protection legislation (EPL) on firm-provided training using a regression discontinuity design. Our analysis demonstrates that higher levels of EPL reduce incentives for firms to invest in workers' training. The number of trained workers falls by about 1.5-1.9 units at the threshold - this is not a negligible effect, corresponding to a 16-20% reduction in the number of trained workers. The results are robust to several sensitivity checks and controls for potential confounding factors (e.g. work councils). The effect of EPL on training is not mediated by different levels of investment in physical capital or propensities to innovate, while it is mostly accounted for by higher worker turnover and more use of temporary contracts, which entail less training, in firms with higher firing costs. Our study highlights the potential adverse effects of EPL on worker training in dual labour markets, owing to larger firms seeking to avoid the higher costs of EPL by means of temporary contracts.

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  • G. Sulis & M. Conti & M. Bratti, 2018. "Employment Protection, Temporary Contracts and Firm-provided Training: Evidence from Italy," Working Paper CRENoS 201802, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  • Handle: RePEc:cns:cnscwp:201802
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    2. Brunello, Giorgio & Wruuck, Patricia, 2020. "Employer provided training in Europe: Determinants and obstacles," EIB Working Papers 2020/03, European Investment Bank (EIB).
    3. Giorgio Cutuli & Alessio Tomelleri, 2023. "Returns to ICT Skills Use and Labour Market Institutions," FBK-IRVAPP Working Papers 2023-02, Research Institute for the Evaluation of Public Policies (IRVAPP), Bruno Kessler Foundation.
    4. Giorgio Cutuli & Alessio Tomelleri, 2023. "Returns to digital skills use, temporary employment, and trade unions in European labour markets," European Journal of Industrial Relations, , vol. 29(4), pages 393-413, December.

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    More about this item

    Keywords

    training; italy; firing costs; employment protection legislation;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • M53 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Training

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