IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Who pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation

  • Marco Leonardi
  • Giovanni Pica

This paper estimates the effect of employment protection legislation (EPL) on workers' individual wages in a quasi-experimental setting, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees and left firing costs unchanged for bigger firms. Accounting for the endogeneity of the treatment status, we find that the slight average wage reduction (between -0:4 and -0:1 percent) that follows the increase in EPL hides highly heterogeneous effects. Workers who change firm during the reform period suffer a drop in the entry wage, while incumbent workers are left unaffected. Results also indicate that the negative wage effect of the EPL reform is stronger on young blue collars and on workers at the low-end of the wage distribution. Finally, workers in low-employment regions suffer higher wage reductions after the reform. This pattern suggests that the ability of the employers to shift EPL costs onto wages depends on workers' and firms' relative bargaining power.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://ftp.igier.unibocconi.it/wp/2012/436.pdf
Download Restriction: no

Paper provided by IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University in its series Working Papers with number 436.

as
in new window

Length:
Date of creation: 2012
Date of revision:
Handle: RePEc:igi:igierp:436
Contact details of provider: Postal:
via Rontgen, 1 - 20136 Milano (Italy)

Phone: 0039-02-58363301
Fax: 0039-02-58363302
Web page: http://www.igier.unibocconi.it/

Order Information: Web: http://www.igier.unibocconi.it/en/papers/index.htm Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Guiso, Luigi & Pistaferri, Luigi & Schivardi, Fabiano, 2001. "Insurance Within the Firm," CEPR Discussion Papers 2793, C.E.P.R. Discussion Papers.
  2. van der Wiel, Karen, 2010. "Better protected, better paid: Evidence on how employment protection affects wages," Labour Economics, Elsevier, vol. 17(1), pages 16-26, January.
  3. Kugler, Adriana & Pica, Giovanni, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," IZA Discussion Papers 1743, Institute for the Study of Labor (IZA).
  4. Tito Boeri & Juan F. Jimeno, . "The Effects of Employment Protection: Learning from Variable Enforcement," Working Papers 2003-12, FEDEA.
  5. Maia Güell, 2000. "Fixed-Term Contracts and Unemployment: An Efficiency Wage Analysis," CEP Discussion Papers dp0461, Centre for Economic Performance, LSE.
  6. Claudia Olivetti & Barbara Petrongolo, 2005. "Unequal Pay or Unequal Employment? A Cross-Country Analysis of Gender Gaps," Boston University - Department of Economics - Macroeconomics Working Papers Series WP2005-003, Boston University - Department of Economics, revised Oct 2008.
  7. Adriana Kugler & Giovanni Pica, 2003. "The Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," LABORatorio R. Revelli Working Papers Series 28, LABORatorio R. Revelli, Centre for Employment Studies.
  8. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2009. "The effect of employment protection legislation and financial market imperfections on investment: Evidence from a firm-level panel of EU countries," Working Papers 0914, Banco de España;Working Papers Homepage.
  9. Adriana Kugler & Giovanni Pica, 2003. "Effects of employment protection and product market regulations on the Italian labor market," Economics Working Papers 722, Department of Economics and Business, Universitat Pompeu Fabra.
  10. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
  11. bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers 272, Banca Italia - Servizio di Studi.
  12. Ervin Prifti & Daniela Vuri, 2012. "Employment Protection and Fertility: Evidence from the 1990 Italian Reform," CEIS Research Paper 236, Tor Vergata University, CEIS, revised 15 Apr 2013.
  13. David H. Autor & John J. Donohue & Stewart J. Schwab, 2004. "The Employment Consequences of Wrongful-Discharge Laws: Large, Small, or None at All?," American Economic Review, American Economic Association, vol. 94(2), pages 440-446, May.
  14. Massimiliano Bratti & Emilia Del Bono & Daniela Vuri, 2005. "New Mothers' Labour Force Participation in Italy: The Role of Job Characteristics," LABOUR, CEIS, vol. 19(s1), pages 79-121, December.
  15. Garibaldi, Pietro & Pacelli, Lia & Borgarello, Andrea, 2003. "Employment Protection Legislation and the Size of Firms," IZA Discussion Papers 787, Institute for the Study of Labor (IZA).
  16. Battistin, Erich & Rettore, Enrico, 2008. "Ineligibles and eligible non-participants as a double comparison group in regression-discontinuity designs," Journal of Econometrics, Elsevier, vol. 142(2), pages 715-730, February.
  17. David Card & Francesco Devicienti & Agata Maida, 2010. "Rent-sharing, Holdup, and Wages: Evidence from Matched Panel Data," NBER Working Papers 16192, National Bureau of Economic Research, Inc.
  18. Guido Imbens & Thomas Lemieux, 2007. "Regression Discontinuity Designs: A Guide to Practice," NBER Technical Working Papers 0337, National Bureau of Economic Research, Inc.
  19. Giuseppe Tattara & Marco Valentini, 2005. "Job flows, worker flows and mismatching in Veneto manufacturing. 1982-1996," Labor and Demography 0511013, EconWPA.
  20. Pierre Cahuc & Winfried Koeniger, 2007. "Feature: Employment Protection Legislation," Economic Journal, Royal Economic Society, vol. 117(521), pages 185-188, 06.
  21. Schivardi, Fabiano & Torrini, Roberto, 2008. "Identifying the effects of firing restrictions through size-contingent differences in regulation," Labour Economics, Elsevier, vol. 15(3), pages 482-511, June.
  22. Roberto Torrini & Fabiano Schivardi, 2004. "Threshold effects and firm size: The case of firing costs," 2004 Meeting Papers 445, Society for Economic Dynamics.
  23. repec:fth:prinin:433 is not listed on IDEAS
  24. McCrary, Justin, 2008. "Manipulation of the running variable in the regression discontinuity design: A density test," Journal of Econometrics, Elsevier, vol. 142(2), pages 698-714, February.
  25. Dolado Juan & Jansen Marcel & Jimeno Serrano Juan, 2007. "A Positive Analysis of Targeted Employment Protection Legislation," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-30, July.
  26. Autor, David & Kerr, William & Kugler, Adriana, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," IZA Discussion Papers 2571, Institute for the Study of Labor (IZA).
  27. Christopher Erickson & Andrea Ichino, 1995. "Wage Differentials in Italy: Market Forces, Institutions, and Inflation," NBER Chapters, in: Differences and Changes in Wage Structures, pages 265-306 National Bureau of Economic Research, Inc.
  28. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October.
  29. Pedro S. Martins, 2008. "Dismissals for cause: The difference that just eight paragraphs can make," Working Papers 24, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
  30. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
  31. Marco Leonardi & Giovanni Pica, 2012. "Who pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Working Papers 436, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  32. Devicenti francesco & Maida Agata & Sestito Paolo, 2005. "Downward Wage Rigidity in Italy : Micro-based Measures and Implications," Department of Economics and Statistics Cognetti de Martiis. Working Papers 200503, University of Turin.
  33. Maia Guell, 2000. "Fixed-term Contracts and Unemployment: an Efficiency Wage Analysis," Working Papers 812, Princeton University, Department of Economics, Industrial Relations Section..
  34. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  35. Cervini, María & Ramos, Xavier & Silva, José I., 2011. "Wage effects of non-wage labour costs," MPRA Paper 34033, University Library of Munich, Germany.
  36. Belzil, Christian, 2000. "Job Creation and Job Destruction, Worker Reallocation, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 183-203, April.
  37. Robert C. Bird & John D. Knopf, 2009. "Do Wrongful-Discharge Laws Impair Firm Performance?," Journal of Law and Economics, University of Chicago Press, vol. 52(2), pages 197-222, 05.
  38. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
  39. David H. Autor & John J. Donohue & Stewart J. Schwab, 2006. "The Costs of Wrongful-Discharge Laws," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 211-231, May.
  40. Scoppa, Vincenzo, 2010. "Shirking and employment protection legislation: Evidence from a natural experiment," Economics Letters, Elsevier, vol. 107(2), pages 276-280, May.
  41. Adriana Kugler adkugler@uh.edu & Giovanni Pica, 2005. "The Effects of Employment Protection on the Italian Labour Market," CSEF Working Papers 135, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  42. Hahn, Jinyong & Todd, Petra & Van der Klaauw, Wilbert, 2001. "Identification and Estimation of Treatment Effects with a Regression-Discontinuity Design," Econometrica, Econometric Society, vol. 69(1), pages 201-09, January.
  43. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
  44. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  45. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  46. repec:pri:indrel:433 is not listed on IDEAS
  47. Adriano Paggiaro & Enrico Rettore & Ugo Trivellato, 2009. "The Effect of a Longer Eligibility to a Labour Market Programme for Dismissed Workers," LABOUR, CEIS, vol. 23(1), pages 37-66, 03.
  48. Adriana D. Kugler & Gilles Saint-Paul, 2004. "How Do Firing Costs Affect Worker Flows in a World with Adverse Selection?," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 553-584, July.
  49. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:igi:igierp:436. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.