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Guess who's there: employment protection legislation and the degree of substitutability between labour contracts

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  • Daniela Sonedda

    (University of Piemonte Orientale)

Abstract

Employment protection legislation may affect the degree of substitutability among different types of labour contracts by changing the individuals sorting into jobs and firms screening in and out jobs. Using administrative data, we document this substitutability in the context of a labour market reform that changed the informative content of individual dismissals and provided incentives to training contracts in Italy in 2012. We present and simulate a model that shows that individual's and firm's behaviour have important implications for the impact of policies that lower firing costs. A more flexible employment protection legislation regime combined with incentives to training contracts reduces inefficiencies of job sorting and screening due to asymmetric information.

Suggested Citation

  • Daniela Sonedda, 2020. "Guess who's there: employment protection legislation and the degree of substitutability between labour contracts," IAAEU Discussion Papers 202007, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    • Handle: RePEc:iaa:dpaper:202007
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    References listed on IDEAS

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    More about this item

    Keywords

    Human Capital; Employment Protection Legislation; Asymmetric-information;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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