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Employment protection and regional worker flows in Italy: an assessment of the theoretical predictions

  • Paolo Naticchioni
  • Emiliano Rustichelli
  • Antonio Scialà

    ()

    (Dipartimento di Economia, Sapienza University of Rome Italy)

In this paper we point out that the theoretical predictions concerning Employment Protection Legislation (EPL) are not fully confirmed by empirical evidence in Italy, a strict EPL country according to OECD. In particular, worker flows computed from both social security dataset and LFS are remarkably high (among the highest of continental Europe), no matter which measure of worker flows is considered (Gross worker Turnover and Gross worker reallocation). Moreover, we argue that geographical differences among regions are quite surprising. Even if EPL is the same across regions, worker flows are higher in the South, region usually supposed to be the least dynamic of the country, than in the North. The standard explanation of the higher flow rates in the South usually concerned the different economic structural composition of the regions (basically firm size and sectoral composition).Using the same weighting procedure as Blanchard & Portugal (2001), we have tested this hypothesis: even after controlling for structural composition, flow rates in the South remain higher. Black labour market, not-standard contracts, public sector incidence are investigated as possible alternative explanations of regional differences. Through a Logit estimation we find out that none of these factors can fully explain these differences. We have also derived, at the regional level, a prevalence of a positive relation between worker flows and unemployment duration, as opposed to what is predicted by the theory. To sum up, almost all the results we have derived do not confirm the expected impacts of a strict EPL on the Italian labour market structure. General considerations about it are derived.

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File URL: http://dipartimento.dse.uniroma1.it/DSEISFOL/papers/012003.pdf
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Paper provided by Dipartimento di Economia, Sapienza University of Rome in its series Working Papers - Dipartimento di Economia with number 1-DEISFOL.

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Length: 26 pages
Date of creation: 2003
Date of revision: 2003
Handle: RePEc:des:wpaper:7
Contact details of provider: Web page: http://dipartimento.dse.uniroma1.it/economia/

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  1. Belot, Michèle & Boone, Jan & van Ours, Jan C, 2002. "Welfare Effects of Employment Protection," CEPR Discussion Papers 3396, C.E.P.R. Discussion Papers.
  2. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer, vol. 20(4), pages 833-867, October.
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  11. Burgess, Simon & Lane, Julia & Stevens, David, 2000. "Job Flows, Worker Flows, and Churning," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 473-502, July.
  12. Pedro Portugal & Olivier Blanchard, 2001. "What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets," American Economic Review, American Economic Association, vol. 91(1), pages 187-207, March.
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  14. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-18, May.
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  18. repec:dgr:kubcen:200248 is not listed on IDEAS
  19. Boeri, Tito, 1996. "Is Job Turnover Countercyclical?," Journal of Labor Economics, University of Chicago Press, vol. 14(4), pages 603-25, October.
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