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Employment Protection, Workforce Mix and Firm Performance

Author

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  • Ardito, Chiara

    (University of Turin)

  • Berton, Fabio

    (European Commission Joint Research Centre (JRC))

  • Pacelli, Lia

    (University of Turin)

  • Passerini, Filippo

    (Catholic University Milan)

Abstract

We measure the impact of employment protection reduction in an uncertain framework on firms' hires and performance, exploiting the Italian 2015 Jobs Act. Results indicate that firms (1) stabilize workforce mainly through contract transformations of low-tenure and low-human-capital incumbent workers performing high-physical and low-intellectual tasks; (2) apply a cost-saving strategy that increases profits and decreases value added per-head. Effects are stronger among non-exporting and non-innovative firms. Our evidence casts doubts on the effectiveness of employment protection reductions in enhancing productivity in the long run.

Suggested Citation

  • Ardito, Chiara & Berton, Fabio & Pacelli, Lia & Passerini, Filippo, 2021. "Employment Protection, Workforce Mix and Firm Performance," IZA Discussion Papers 14613, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14613
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    References listed on IDEAS

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    1. Hijzen, Alexander & Mondauto, Leopoldo & Scarpetta, Stefano, 2017. "The impact of employment protection on temporary employment: Evidence from a regression discontinuity design," Labour Economics, Elsevier, vol. 46(C), pages 64-76.
    2. Kampelmann, Stephan & Rycx, François, 2012. "The impact of educational mismatch on firm productivity: Evidence from linked panel data," Economics of Education Review, Elsevier, vol. 31(6), pages 918-931.
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    6. Rachel Griffith & Gareth Macartney, 2014. "Employment Protection Legislation, Multinational Firms, and Innovation," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 135-150, March.
    7. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Does Employment Protection Reduce Productivity? Evidence From US States," Economic Journal, Royal Economic Society, vol. 117(521), pages 189-217, June.
    8. Selwaness, Irène & Zaki, Chahir, 2019. "On the interaction between exports and labor market regulation: Evidence from the MENA countries," The Quarterly Review of Economics and Finance, Elsevier, vol. 73(C), pages 24-33.
    9. Paolo Sestito & Eliana Viviano, 2018. "Firing costs and firm hiring: evidence from an Italian reform," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(93), pages 101-130.
    10. Bjuggren, Carl Magnus, 2018. "Employment protection and labor productivity," Journal of Public Economics, Elsevier, vol. 157(C), pages 138-157.
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    Cited by:

    1. Giuseppe Grasso & Konstantinos Tatsiramos, 2023. "The Impact of Restricting Fixed-Term Contracts on Labor and Skill Demand," CESifo Working Paper Series 10693, CESifo.
    2. Bottasso, Anna & Bratti, Massimiliano & Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2023. "Labor Market Regulation and Firm Adjustments in Skill Demand," IZA Discussion Papers 16262, Institute of Labor Economics (IZA).
    3. Pierre Cahuc & Pauline Carry & Franck Malherbet & Pedro S. Martins, 2023. "Spillover effects of employment protection," Nova SBE Working Paper Series wp655, Universidade Nova de Lisboa, Nova School of Business and Economics.

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    More about this item

    Keywords

    productivity; human capital; employment protection; tenure; tasks;
    All these keywords.

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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