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For the rest of our lives: Flexibility and innovation in Italy

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We study the effect of temporary workers on innovation both theoretically and empirically. First, we develop a model where a representative firm chooses between different types of projects (routine vs innovative) and different types of labor contracts (temporary vs permanent). In doing so, it considers the effect of these different strategies on the workers’ incentives to invest in firm-specific skills. Our key finding is that firms offering temporary contracts are less likely to invest in innovative projects, and that this is effect is stronger in industries characterized by a “garage-business” innovation regime. Second, we test our hypotheses using firm-level data on employment composition and patent filing. Consistently with our theoretical predictions, we find that temporary workers are detrimental to innovation, and that this effect is mitigated by the concentration of patent-filing at the industry-level.

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  • Dughera, Stefano & Quatraro,Francesco & Ricci,Andrea & Vittori,Claudia, 2021. "For the rest of our lives: Flexibility and innovation in Italy," Department of Economics and Statistics Cognetti de Martiis. Working Papers 202115, University of Turin.
    • Handle: RePEc:uto:dipeco:202115
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