Flexible Employment, Job Flows and Labour Productivity

In this paper we provide evidence on the effects of temporary employment on job flows, labour productivity and investment. As a source of identification, we exploit reforms in the legislation of fixed-term and apprenticeships contracts whose implementation varied over regions and industries. Results indicate that the reform of apprenticeship contracts has increased the turnover of workers and has induced capital-labor substitution in favour of labour, with an overall productivity-enhancing effect. The reform of fixed-term contracts instead does not seem to have had the intended results and may have made the use of these contracts more costly rather than less costly. Ineffectiveness of the reform may also depend on firms substituting across different types of labour: we estimate elasticities of substitution that are consistent with this interpretation.