Two Tier Reforms of Employment Protection: A Honeymoon Effect?

Tito Boeri () and Pietro Garibaldi ()

No 37, Carlo Alberto Notebooks from Collegio Carlo Alberto

Abstract: Labor market reforms increasing flexibility at the margin have been recently paying out in terms of employment growth. This paper argues that two-tier labor market reforms have a transitional honeymoon, job creating effect. In a dynamic model of labor demand under uncertainty, the paper predicts that in the aftermath of reforms, beyond an increase in employment, there should be a reduction in employment inaction and in the mean and cross sectional variance of labor productivity. Based on a variety of firm-level data on Italy in the period 1995-2000, we find evidence of our empirical implications.

Keywords: Labour demand; firing costs; employment protection reform. (search for similar items in EconPapers)
JEL-codes: J30 (search for similar items in EconPapers)
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Date: 2007
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Journal Article: Two Tier Reforms of Employment Protection: a Honeymoon Effect? (2007)
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Persistent link: http://EconPapers.repec.org/RePEc:cca:wpaper:37

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