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Shirking and Employment Protection Legislation: Evidence from a Natural Experiment

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  • Scoppa, Vincenzo

Abstract

In 1990 a reform in Italy has modified the employment protection legislation for employees of small firms (with fewer than 16 employees) making much more costly for firms to dismiss workers, while leaving unchanged the employment protection in large firms. Using a sample of administrative data (WHIP) from National Institute of Social Security we compare absenteeism rates (used as a proxy of shirking) in small and in large firms in the years just before (1989) and after (1991) the reform, with a difference-in-differences estimator. In line with theoretical predictions, we find a strong increase (around 18%) in shirking of workers employed in small firms after the increase in dismissal costs. This finding is robust to alternative definitions of small firm and to different time periods.

Suggested Citation

  • Scoppa, Vincenzo, 2008. "Shirking and Employment Protection Legislation: Evidence from a Natural Experiment," MPRA Paper 16694, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:16694
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    References listed on IDEAS

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    1. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries," Economic Policy, CEPR;CES;MSH, vol. 24, pages 349-402, April.
    2. Andrea Ichino & Giovanni Maggi, 2000. "Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 115(3), pages 1057-1090.
    3. 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.
    4. Nazmul Chaudhury & Jeffrey Hammer & Michael Kremer & Karthik Muralidharan & F. Halsey Rogers, 2006. "Missing in Action: Teacher and Health Worker Absence in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 91-116, Winter.
    5. Riphahn, Regina T., 2004. "Employment protection and effort among German employees," Economics Letters, Elsevier, vol. 85(3), pages 353-357, December.
    6. 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.
    7. Engellandt, Axel & Riphahn, Regina T., 2005. "Temporary contracts and employee effort," Labour Economics, Elsevier, vol. 12(3), pages 281-299, June.
    8. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    9. Andrea Ichino & Regina T. Riphahn, 2005. "The Effect of Employment Protection on Worker Effort: Absenteeism During and After Probation," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 120-143, March.
    10. Barmby, Tim & Sessions, John G & Treble, John G, 1994. " Absenteeism, Efficiency Wages and Shirking," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(4), pages 561-566.
    11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Employment protection effects
      by chris dillow in Stumbling and Mumbling on 2011-01-11 19:43:39

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    Cited by:

    1. Vincenzo Scoppa & Daniela Vuri, 2014. "Absenteeism, unemployment and employment protection legislation: evidence from Italy," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-25, December.
    2. 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.
    3. Michael Jones, 2015. "How do teachers respond to tenure?," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-19, December.
    4. Cristini, Annalisa & Origo, Federica & Pinoli, Sara, 2017. "The healthy fright of losing a good one for a bad one," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 129-144.
    5. Leila Baghdadi & Rihab Bellakhal & Marc-Arthur Diaye, 2016. "Financial Participation: Does the Risk Transfer Story Hold in France?," British Journal of Industrial Relations, London School of Economics, vol. 54(1), pages 3-29, March.
    6. repec:bla:stratm:v:38:y:2017:i:2:p:163-183 is not listed on IDEAS
    7. Dräger, Vanessa, 2015. "Do Employment Protection Reforms Affect Well-Being?," IZA Discussion Papers 9114, Institute for the Study of Labor (IZA).
    8. Inmaculada Garcia & Colin Green & Maria Navarro Paniagua, 2012. "New Estimates of the Effect of Temporary Employment on Absenteeism," Working Papers 24151321, Lancaster University Management School, Economics Department.
    9. Maria De Paola & Valeria Pupo & Vincenzo Scoppa, 2009. "Absenteeism In The Italian Public Sector: The Effects Of Changes In Sick Leave Compensation," Working Papers 200916, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.

    More about this item

    Keywords

    Absenteeism; Shirking; Employment Protection Legislation; Difference-in-differences.;

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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