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Human capital, unemployment, and probability of transition to permanent employment in the Italian regional labour markets

Listed author(s):
  • Emanuela Ghignoni

In the last decade Italian and European labour markets have been characterized by a strong increase of temporary employment and the recent approval of the “Biagi Law†1 is often assumed to be a factor to boost temporary work in Italy. Referring to some theoretical frameworks, we could look at this situation in terms of a “contractual exchange†2. In this manner workers (or trade unions) could accept more precariousness in exchange for higher employment rates3. Nevertheless a number of empirical researches show that, since allowing for more temporary jobs to be created entails an increase in both job creation and job destruction, the effects on total employment are uncertain4. In any case, even if we believed that more precariousness involves higher employment rates, another very important question would emerge, that is: how long are people going to spend in precarious jobs?In effect the recent evolution of labour markets induced many economists to investigate the nature of temporary work, and one of the most important question to answer has been: can temporary jobs serve as “stepping stones†to enter stable employment or do they represent “dead-end jobs†?5 On the one hand, temporary contracts should help the unemployed to get (back) into employment and to find a stable job, by reducing unemployment spells, the risks of long-run unemployment, and by preserving/improving their human capital through on the job experience. In this case temporary contracts would be a way to select the future permanent employees6. On the other hand, it has been argued that, if temporary work is characterized by worse monetary and non-monetary conditions than stable jobs, and if flexible firms adopt a segmentation of the workforce into a “core†of stable jobs and a “periphery†of temporary workers, then dual labour markets may arise and precariousness may become a “trap†7. In any case, the variables involved in this phenomenon seem to be very complex and, as far as other theoretical contributions8 are concerned, in this paper I intend to focus upon the influence of learning processes, human capital accumulation9 and unemployment rates at local level. In particular, to highlight the influence of these variables on the probability of escaping from the temporary work “trap†and on the intensity of transition to permanent employment, after developing a simple theoretical model, a discrete time duration model with gamma-distributed unobserved heterogeneity, based on ECHP data for Italian regions (1995-2001), will be estimated. The paper is organized as follows. Section 2 presents a simple theoretical model in which the intensity of transition between precarious and stable jobs depends on individual human capital and unemployment rates at regional level; section 3 illustrates the steps of my empirical analysis; section 4 presents the econometric model I used; section 5 is devoted to the empirical estimates and the discussion of the main results. Some concluding remarks and policy implications follow.

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Paper provided by University of Rome La Sapienza, Department of Public Economics in its series Working Papers with number 93.

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Length: 33
Date of creation: Jul 2006
Handle: RePEc:sap:wpaper:wp93
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  1. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages 189-213, June.
  2. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, October.
  3. Luca NUNZIATA & Stefano STAFFOLANI, 2001. "On Short-term Contracts Regulations," Working Papers 150, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  4. Booth, Alison L. & Francesconi, Marco & Frank, Jeff, 2000. "Temporary jobs: who gets them, what are they worth, and do they lead anywhere?," ISER Working Paper Series 2000-13, Institute for Social and Economic Research.
  5. Gilles Saint-Paul, 2004. "Why are European Countries Diverging in their Unemployment Experience?," Journal of Economic Perspectives, American Economic Association, vol. 18(4), pages 49-68, Fall.
  6. Bassanini, Andrea & Brunello, Giorgio, 2003. "Is Training More Frequent When Wage Compression is Higher? Evidence from the European Community Household Panel," IZA Discussion Papers 839, Institute for the Study of Labor (IZA).
  7. Giuseppe Croce & Emanuela Ghignoni, 2002. "Training by firms in italian regional labour markets: the effects of education and unemployment," Working Papers 66, University of Rome La Sapienza, Department of Public Economics.
  8. Emanuela Ghignoni, 2002. "Istruzione e condizioni monetarie e non monetarie di lavoro nel Mezzogiorno," QUADERNI DI ECONOMIA DEL LAVORO, FrancoAngeli Editore, vol. 2002(74).
  9. Gianna Barbieri & Paolo Sestito, 2008. "Temporary Workers in Italy: Who Are They and Where They End Up," LABOUR, CEIS, vol. 22(1), pages 127-166, 03.
  10. Mario Cleves & William W. Gould & Roberto G. Gutierrez & Yulia Marchenko, 2010. "An Introduction to Survival Analysis Using Stata," Stata Press books, StataCorp LP, edition 3, number saus3, January.
  11. Susan N. Houseman & Arne L. Kalleberg & George A. Erickcek, 2001. "The Role of Temporary Help Employment in Tight Labor Markets," Upjohn Working Papers and Journal Articles 01-73, W.E. Upjohn Institute for Employment Research.
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