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Temporary hires and innovative investments

  • Marco Malgarini

    ()

    (Italian National Institute of Statistics)

  • Massimo Mancini

    ()

    (Italian National Institute of Statistics)

  • Lia Pacelli

    ()

    (Department of Economics and Public Finance "G. Prato", University of Torino)

The flexicurity approach claims a positive effect of flexible labour on firm performance, also through an increased ability to innovate. Critics consider it a deregulation of the labour market, decreasing investment in human capital and innovation. We contribute to this broad debate providing an estimate of the relationships linking innovative investment, substitution investment, permanent hires and temporary hires. In particular, we aim at affirming or denying that innovative investments are accompanied by a specific kind of workforce, being it stable or flexible. In doing so, we contribute to bridge the gap among two quite separate strands of literature, as existing literature usually analyses capital and labour separately. Estimating a non linear recursive equation system we highlight a significant increase in the likelihood of hiring on a permanent base when the firm innovates; this holds till 2008. Afterward, during the crisis, innovating firms are more likely to hire using temporary contracts instead, a possible signal of a cost saving strategy adopted in a loose labour market. Furthermore, both permanent and temporary hires never depend on increases in labour costs; however, substitution investment increases when labour cost increases, maybe in an attempt to increase labour productivity through a more efficient capital equipment.

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File URL: http://web.econ.unito.it/prato/papers/n19.pdf
File Function: First version, 2011
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Paper provided by Former Department of Economics and Public Finance "G. Prato", University of Torino in its series Working papers with number 19.

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Length: 37 pages
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:tur:wpaper:19
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Web page: http://eco83.econ.unito.it/prato/
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  1. Alessandra Del Boca & Paola Rota, 1998. "How Much Does Hiring and Firing Cost? Survey Evidence from a Sample of Italian Firms," LABOUR, CEIS, vol. 12(3), pages 427-449, 09.
  2. Ian Dew-Becker & Robert J. Gordon, 2008. "The Role of Labor Market Changes in the Slowdown of European Productivity Growth," NBER Working Papers 13840, National Bureau of Economic Research, Inc.
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