IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/11658.html
   My bibliography  Save this paper

Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform

Author

Listed:
  • Adriana Kugler
  • Giovanni Pica

Abstract

This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger firms, to set up a natural experiment research design. We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to big firms, especially in sectors with higher employment volatility. Moreover, we find that the reform reduced firms' employment adjustments on the internal margin as well as entry rates while increasing exit rates.

Suggested Citation

  • Adriana Kugler & Giovanni Pica, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," NBER Working Papers 11658, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:11658
    Note: LS PE
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w11658.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    2. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, "undated". "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
    3. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), Labour Market Adjustments in Europe, chapter 4, Edward Elgar Publishing.
    4. 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.
    5. Boeri, Tito & Jimeno, Juan F., 2005. "The effects of employment protection: Learning from variable enforcement," European Economic Review, Elsevier, vol. 49(8), pages 2057-2077, November.
    6. Ichino, Andrea & Riphahn, Regina T., 2001. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," IZA Discussion Papers 385, Institute of Labor Economics (IZA).
    7. Daron Acemoglu & Joshua D. Angrist, 2001. "Consequences of Employment Protection? The Case of the Americans with Disabilities Act," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 915-957, October.
    8. 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.
    9. Justin Wolfers, 2005. "Measuring the Effects of Employment Protection on Job Flows: Evidence from Seasonal Cycles," Computing in Economics and Finance 2005 98, Society for Computational Economics.
    10. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, April.
    11. Adriana Kugler, 1999. "The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 389-410, August.
    12. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 699-726.
    13. Pietro Garibaldi & Lia Pacelli & Andrea Borgarello, 2004. "Employment Protection Legislation and the Size of Firms," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 33-68, April.
    14. Ichino, Andrea & Polo, Michele & Rettore, Enrico, 2003. "Are judges biased by labor market conditions?," European Economic Review, Elsevier, vol. 47(5), pages 913-944, October.
    15. 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.
    16. 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.
    17. 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.
    18. Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), 2006. "Labour Market Adjustments in Europe," Books, Edward Elgar Publishing, number 4013.
    19. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    20. Paul Oyer & Scott Schaefer, 2000. "Layoffs and Litigation," RAND Journal of Economics, The RAND Corporation, vol. 31(2), pages 345-358, Summer.
    21. Friesen, Jane, 2005. "Statutory firing costs and lay-offs in Canada," Labour Economics, Elsevier, vol. 12(2), pages 147-168, April.
    22. Jennifer Hunt, 2000. "Firing Costs, Employment Fluctuations and Average Employment: An Examination of Germany," Economica, London School of Economics and Political Science, vol. 67(266), pages 177-202, May.
    23. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
    24. Fabiano Schivardi & Roberto Torrini, 2004. "Firm size distribution and employment protection legislation in Italy," Temi di discussione (Economic working papers) 504, Bank of Italy, Economic Research and International Relations Area.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kugler, Adriana D. & Pica, Giovanni, 2005. "Effects of Employment Protection on Worker and Job Flows: Evidence from the 1990 Italian Reform," CEPR Discussion Papers 5256, C.E.P.R. Discussion Papers.
    2. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), Labour Market Adjustments in Europe, chapter 4, Edward Elgar Publishing.
    3. Kugler, Adriana & Pica, Giovanni, 2003. "The effects of employment protection and product market regulations on the Italian labor market," Discussion Paper Series In Economics And Econometrics 0310, Economics Division, School of Social Sciences, University of Southampton.
    4. Parsons, Donald O., 2011. "Mandated Severance Pay and Firing Cost Distortions: A Critical Review of the Evidence," IZA Discussion Papers 5776, Institute of Labor Economics (IZA).
    5. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    6. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2015. "Uncertainty and the Politics of Employment Protection," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 209-267.
    7. Adriana D. Kugler, 2004. "The Effect of Job Security Regulations on Labor Market Flexibility. Evidence from the Colombian Labor Market Reform," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 183-228, National Bureau of Economic Research, Inc.
    8. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686.
    9. Leonardi, Marco & Pica, Giovanni, 2007. "Employment Protection Legislation and Wages," IZA Discussion Papers 2680, Institute of Labor Economics (IZA).
    10. Marco Leonardi & Giovanni Pica, 2013. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Economic Journal, Royal Economic Society, vol. 123(12), pages 1236-1278, December.
    11. Micco, Alejandro & Pagés, Carmen, 2006. "The Economic Effects of Employment Protection: Evidence from International Industry-Level Data," IZA Discussion Papers 2433, Institute of Labor Economics (IZA).
    12. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    13. Carmen Pagés-Serra & Alejandro Micco, 2008. "Efectos económicos de la protección del empleo: Elementos de juicio a partir de datos internacionales a nivel de actividad económica," Research Department Publications 4497, Inter-American Development Bank, Research Department.
    14. Pierre, Gaëlle & Scarpetta, Stefano, 2004. "Employment Regulations through the Eyes of Employers: Do They Matter and How Do Firms Respond to Them?," IZA Discussion Papers 1424, Institute of Labor Economics (IZA).
    15. repec:ilo:ilowps:433276 is not listed on IDEAS
    16. David H. Autor & William R. Kerr & Adriana D. Kugler, 2007. "Do Employment Protections Reduce Productivity? Evidence from U.S. States," NBER Working Papers 12860, National Bureau of Economic Research, Inc.
    17. 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.
    18. von Below, David & Thoursie, Peter Skogman, 2010. "Last in, first out?: Estimating the effect of seniority rules in Sweden," Labour Economics, Elsevier, vol. 17(6), pages 987-997, December.
    19. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, "undated". "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
    20. John T. Addison & Paulino Teixeira, 2003. "The Economics of Employment Protection," Journal of Labor Research, Transaction Publishers, vol. 24(1), pages 85-129, January.
    21. Henri Fraisse & Francis Kramarz & Corinne Prost, 2015. "Labor Disputes and Job Flows," ILR Review, Cornell University, ILR School, vol. 68(5), pages 1043-1077, October.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:11658. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.