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

By Adriana D. Kugler, Giovanni Pica. Social Science Research Network, 2008

291 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/66dc8db3b0f2eff89beb7bd6c87b7a1c9fef86ff

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In Economics and Econometrics

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Citations in the corpus

• Employment Protection Legislation, Adjustment Costs and Cross-Country Differences in Cost Behavior (2012, background): “from LaPorta et al. (2006) in one specification, and an alternative shareholder protection index from Djankov et al.”
• Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make (2009, unknown): “(2005), Autor et al. (2006), Varejao & Portugal (2007), Kugler & Pica (forthcoming) , Bauer”
• Employment Laws in Developing Countries (2009, background): “…for outcomes like employment, unemployment and wages (Freeman, 1998; Lazear, 1990; Nickell, 1997; Blanchard and Wolfers, 2000; Blanchard and Portugal, 2001; Di Tella and MacCulloch, 2005), or on firms’ investment strategies and productivity (Holmes, 1998; Autor et al., 2007; Kugler and Pica, 2008).”
• Firing Costs and Capital Structure Decisions (2016, unknown): “…and Vallanti (2007) show that more stringent European firing laws significantly weaken the relation between layoffs and the business cycle, and Kugler and Pica (2008) find that higher dismissal costs in Italy reduce worker separation rates.6 This lower sensitivity of workforce reductions to…”
• Labor Market Policy: A Comparative View on the Costs and Benefits of Labor Market Flexibility (2010, unknown): “Further, the Italian reform of 1990 raising dismissal costs for firms with fewer than 15 workers was associated with reduced accessions and separations for these firms relative to larger firms (Kugler and Pica 2008).”
• The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU Countries (2009, unknown): “Among the recent empirical papers, Autor et al. (2006) and Kugler and Pica (2008) study the impact of EPL on employment r allocation at the firm level in the US and Italy, respectively.”
• Setting It Right: Employment Protection, Labour Reallocation and Productivity (2011, result): “Schivardi and Torrini (2008), using an Italian matched employer-employee dataset, find similar results as do Kugler and Pica (2008) who assess the effect of a reform in Italy in 1990 that increased firing restrictions for small firms.”
• Determinants of self-employment survival in Europe (2012, background): “(2002); van Praag (2003); Gurley-Calvez (2006); Fertala (2008); Gurley-Calvez and Bruce (2008); Kugler and Pica (2008) and Mun ˜oz and Cueto (2008).”
• Segmentation (2019, background): “The firm-size restrictions follow, among others, Burgess, Lane and Stevens (2001), Kugler and Pica (2008), and Martins (2009).”
• Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation (2013, unknown): “Second, it imposed substantial costs on small rms. Kugler and Pica (2008) look at the e¤ect of this reform on job and workers ows and nd that accessions and separations decreased by about 13% and 15% in small relative to large rms after the reform.”