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EPL and Job Contract Conversion Rate: The Italian CFL Case

  • Grassi, Emanuele

This paper analyzes the effect of EPL on the conversion rate of temporary contracts into permanent ones in the same firm. Once EPL is enforced, two effects might arise: employers could tend to replace their permanent workforce with short-term employment because of the lower expected value of a filled job, but firms might also prefer to stabilize part of their temporary workforce. In fact, firms already know about workers' skills and attitudes and workers have acquired information about wages, career prospects and employers' expectations. This in turn implies a lower risk of job-breakup. Which of these two effects is dominant is ultimately an empirical question. I exploit a natural experiment set up yielded by the Italian 1990 reform which introduced unjust dismissal costs for small businesses to identify the effect of EPL on the conversion rate of working and training contracts (Contratti di formazione e lavoro - CFL) into permanent ones in the same firm.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 12679.

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Date of creation: Jan 2009
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Handle: RePEc:pra:mprapa:12679
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  1. Nada Eissa & Jeffrey B. Liebman, 1996. "Labor Supply Response to the Earned Income Tax Credit," The Quarterly Journal of Economics, Oxford University Press, vol. 111(2), pages 605-637.
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  12. Cahuc, Pierre & Postel-Vinay, Fabien, 2001. "Temporary Jobs, Employment Protection and Labor Market Performance," IZA Discussion Papers 260, Institute for the Study of Labor (IZA).
  13. Bruno Contini & Francesca Cornaglia & Claudio Malpede & Enrico Rettore, 2002. "Measuring the impact of the Italian CFL programme on the job opportunities for the youths," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B1-4, International Conferences on Panel Data.
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