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Is There a Trade-off Between Labour Flexibility and Productivity Growth? Some Evidence from Italian Firms

Federico Lucidi
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Federico Lucidi: Fondazione Giacomo Brodolini

Chapter 13 in Non-Standard Employment and Quality of Work. The Case of Italy, 2012, pp 261-285 from AIEL - Associazione Italiana Economisti del Lavoro

Abstract: This chapter deals with the empirical testing of the potential trade-off between flexibility and productivity growth by using firm-level data. The model of reference relies on various works by Sylos-Labini, The model is estimated on data from the 9th “Indagine sulle imprese manifatturiere”, conducted by the Capitalia Bank Research Centre (formerly Mediocredito Centrale) in the period 2001-2003, where ‘flexibility’ indicators are included among the factors explaining labour productivity growth at firm level. Amongst the results obtained the estimation shows that firms exhibiting a higher share of temporary workers in their workforces and a higher rate of labour turnover achieved a slower growth of value added per worker in the period 2001-2003. Moreover, lagged labour costs per employee (both in levels and in changes) have a significant role in explaining labour productivity growth during the period: a decreasing wage bill makes it possible to preserve low-productive jobs and labour-intensive productive processes, curbing incentives for their modernization and the adoption of new technologies. These considerations raise some doubts concerning the sustainability of both labour-market reforms and continuing wage restraint policies in the long run.

Keywords: flexibility; temporary work; firm's competitiveness; productivity growth. (search for similar items in EconPapers)
JEL-codes: J22 L25 J24 (search for similar items in EconPapers)
Date: 2012
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