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The effects of partial employment protection reforms: evidence from Italy

Diego Daruich, Sabrina Di Addario and Raffaele Saggio ()
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Raffaele Saggio: University of British Columbia, Canada

No 1390, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We combine matched employer-employee data with firms’ financial records to study a 2001 Italian reform that lifted constraints on the employment of temporary contract workers while maintaining rigid employment protection regulations for employees hired under permanent contracts. Exploiting the staggered implementation of the reform across different collective bargaining agreements, we find that this policy change led to an increase in the share of temporary contracts but failed to raise employment. The reform had both winners and losers. Firms are the main winners as the reform was successful in decreasing labor costs, leading to higher profits. By contrast, young workers are the main losers since their earnings were substantially depressed following the policy change. Rent-sharing estimates show that temporary workers receive only two-thirds of the rents shared by firms with permanent workers, helping explain most of the labor costs and earnings reductions caused by the reform.

Keywords: reform evaluation; contracts; employment; wages; profits (search for similar items in EconPapers)
JEL-codes: D22 J08 K41 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-eur, nep-lab and nep-law
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Working Paper: The Effects of Partial Employment Protection Reforms: Evidence from Italy (2020) Downloads
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