Does Weaker Employment Protection Lower the Cost of Job Loss?

Marco Francesconi and Daniela Sonedda

No 20278, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Leveraging a major Italian reform enacted in June 2012 that eroded employment protection to workers on permanent contracts, we use detailed administrative data to estimate how this reduction affected the cost of job loss. We employ a stacked event-study research design, comparing treated and untreated workers as they move from employment into nonemployment. Weakening employment protection led to additional penalties in terms of lower re-hiring earnings and lower re-employment probabilities. Heterogeneous effects of the reform deepened pre-existing divides, penalizing labor market outsiders, such as young workers, and curbing employment opportunities for individuals in poorer regions, such as the South.

JEL-codes: J30 J41 J63 J65 J68 (search for similar items in EconPapers)
Date: 2025-05
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