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Courts' ineffciency and irregular workers:identifying the impact of real EPL

Listed author(s):
  • Giuseppina Gianfreda

    ()

    (Università della Tuscia)

  • Giovanna Vallanti

    ()

    (Università Luiss "Guido Carli")

The employment protection legislation is not enforced uniformly both across and within countries. Among the others, the enforcement of regulation depends on the courts' actions and on the capacity of firms to escape legislation. We exploit the variation in courts' inefficiency across Italian judicial districts in order to provide evidence on the impact of EPL on job reallocation and firms' productivity. We show that the inefficiency of the judicial system has a causal effect on job fows by reducing both job creation and job destruction with a detrimental impact on firms' labour productivity. Moreover, we find that the negative impact of firing costs on job turnover and pro- ductivity is weaker in regions with a large share of irregular workers, since firms can partially adjust their labour force through the informal channel.

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File URL: http://static.luiss.it/RePEc/pdf/lleewp/13104.pdf
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Paper provided by Dipartimento di Economia e Finanza, LUISS Guido Carli in its series Working Papers LuissLab with number 13104.

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Date of creation: 2013
Handle: RePEc:lui:lleewp:13104
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  1. Bosch, Mariano & Goni, Edwin & Maloney, William, 2007. "The determinants of rising informality in Brazil : Evidence from gross worker flows," Policy Research Working Paper Series 4375, The World Bank.
  2. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
  3. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2010. "The effects of employment protection legislation and financial market imperfections on investment: evidence from a firm-level panel of EU countries," Economic Policy, CEPR;CES;MSH, vol. 25, pages 117-163, January.
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  6. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
  7. Rita Almeida & Pedro Carneiro, 2012. "Enforcement of Labor Regulation and Informality," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 64-89, July.
  8. Salvanes, Kjell G, 1997. " Market Rigidities and Labour Market Flexibility: An International Comparison," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(2), pages 315-333, June.
  9. Timothy Besley & Robin Burgess, 2004. "Can Labor Regulation Hinder Economic Performance? Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 91-134.
  10. Jappelli, Tullio & Pagano, Marco & Bianco, Magda, 2005. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(2), pages 223-244, April.
  11. Michele Belot & Jan Boone & Jan Van Ours, 2007. "Welfare-Improving Employment Protection," Economica, London School of Economics and Political Science, vol. 74(295), pages 381-396, 08.
  12. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.
  13. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
  14. Julián Messina & Giovanna Vallanti, 2007. "Job Flow Dynamics and Firing Restrictions: Evidence from Europe," Economic Journal, Royal Economic Society, vol. 117(521), pages 279-301, June.
  15. Danielle Venn, 2009. "Legislation, Collective Bargaining and Enforcement: Updating the OECD Employment Protection Indicators," OECD Social, Employment and Migration Working Papers 89, OECD Publishing.
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