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Employment Protection Legislation and Mismatch: Evidence from a Reform

Author

Listed:
  • Berton, Fabio

    (European Commission Joint Research Centre (JRC))

  • Devicienti, Francesco

    (University of Turin)

  • Grubanov-Boskovic, Sara

    (European Commission, Joint Research Centre)

Abstract

Liberalization of temporary contracts has been a hallmark of labor market reforms during the last decades. More recently, factors like the sovereign debt crisis pushed the most indebted countries to unprecedented reductions of employment protection legislation (EPL) also on open-ended contracts. These policies are justified under the assumption that EPL harms the allocation of workers on the jobs where they are most productive. How EPL affects the quality of job matches is nonetheless an underexplored issue. In this paper, we provide new evidence that exploits exactly one of these recent reforms, the so-called Fornero Law, introduced in Italy in 2012 in the background of austerity reforms. Results show that good matches have increased. Further, the reduction in EP favored labor reallocation. Eventually, it was also followed by an increase in productivity, albeit small. While the results are consistent with the economic theory that informed deregulation, we highlight caveats and limitations.

Suggested Citation

  • Berton, Fabio & Devicienti, Francesco & Grubanov-Boskovic, Sara, 2017. "Employment Protection Legislation and Mismatch: Evidence from a Reform," IZA Discussion Papers 10904, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10904
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    Cited by:

    1. Bottasso, Anna & Bratti, Massimiliano & Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2023. "Labor Market Regulation and Firm Adjustments in Skill Demand," IZA Discussion Papers 16262, Institute of Labor Economics (IZA).
    2. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-provided Training: Quasi-experimental Evidence from a Labour Market Reform," GLO Discussion Paper Series 368, Global Labor Organization (GLO).
    3. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    4. Igor Fedotenkov & Virmantas Kvedaras & Miguel Sanchez-Martinez, 2024. "Employment protection and labour productivity growth in the EU: skill-specific effects during and after the Great Recession," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(1), pages 209-262, February.
    5. Paolo Barbieri & Giorgio Cutuli, 2018. "Dual Labour Market Intermediaries in Italy: How to Lay off “Lemons”—Thereby Creating a Problem of Adverse Selection," De Economist, Springer, vol. 166(4), pages 477-502, December.
    6. Belloc, Filippo & Burdin, Gabriel & Landini, Fabio, 2022. "Robots, Digitalization, and Worker Voice," GLO Discussion Paper Series 1038, Global Labor Organization (GLO).
    7. Marco Francesconi & Daniela Sonedda, 2024. "Does Weaker Employment Protection Lower the Cost of Job Loss?," CESifo Working Paper Series 11417, CESifo.
    8. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2018. "Employment Protection, Temporary Contracts and Firm-Provided Training: Evidence from Italy," IZA Discussion Papers 11339, Institute of Labor Economics (IZA).
    9. Barbieri Teresa & Devicienti Francesco & Manello Alessandro & Vannoni Davide, 2022. "The effect of EPL on the internationalization of small firms," Working papers 078, Department of Economics, Social Studies, Applied Mathematics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    10. Gianluca Cerruti & Gianluca Mazzarella & Mauro Migliavacca, 2023. "Employment protection legislation and household formation: evidence from Italy," Review of Economics of the Household, Springer, vol. 21(3), pages 913-939, September.
    11. Esposito, Piero & Scicchitano, Sergio, 2020. "Educational mismatches, technological change and unemployment: evidence from secondary and tertiary educated workers," GLO Discussion Paper Series 465, Global Labor Organization (GLO).
    12. Filippo Belloc & Gabriel Burdin & Fabio Landini, 2023. "Advanced Technologies and Worker Voice," Economica, London School of Economics and Political Science, vol. 90(357), pages 1-38, January.
    13. Giovanni Dosi & Dario Guarascio & Andrea Ricci & Maria Enrica Virgillito, 2021. "Neodualism in the Italian business firms: training, organizational capabilities, and productivity distributions," Small Business Economics, Springer, vol. 57(1), pages 167-189, June.
    14. Anneleen Vandeplas & Anna Thum-Thysen, 2019. "Skills Mismatch and Productivity in the EU," European Economy - Discussion Papers 100, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    15. Hoxha, Sergei & Kleinknecht, Alfred, 2020. "When labour market rigidities are useful for innovation. Evidence from German IAB firm-level data," Research Policy, Elsevier, vol. 49(7).
    16. Agata Maida & Cristina Tealdi, 2021. "Does Employment Protection Affect Qualification Mismatch?," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 701-729, September.

    More about this item

    Keywords

    productivity; mismatch; turnover; employment protection legislation; Fornero Law; difference-in-differences;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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