Firm's level labour intensity in Italy after the Great Recession

Enrico D'Elia and Alessandra Righi

No 1, Working Papers from Department of the Treasury, Ministry of the Economy and of Finance

Abstract: A special qualitative questionnaire attached to the Business Surveys carried on in February 2016 by Istat sheds some light on the labour demand after the Great Recession, also related to the output perspectives, the utilized productive capacity and the specific conditions and strategies of the firms. An ordered logit model is used to analyse the characteristics of the firms with different levels of employment response to a 10% permanent output increase. The first result is that the employment elasticity to output lies only between 0.10 and 0.25, with little differences by sector and firm’s size. It could be a sign that labour intensity of output is low and possibly reducing (and that productivity is increasing as well), or that jobs are created mainly by newborn firms (necessarily underrepresented in the survey sample). The estimated models also support the relevance of thresholds in firm’s behavior. For instance, capacity utilization and firm’s size apparently raise employment only if the former exceeds 80%-90% and the latter 50 employed persons. However, the heterogeneity among firms’ labour intensity remains huge even after controlling for many firm’s specific factors. It follows that one-size-fits-all incentives are expectedly inefficient.

Keywords: Ordered Logit Model; Labour Demand; Business Survey; Firm’s Level Data (search for similar items in EconPapers)
JEL-codes: D22 J23 (search for similar items in EconPapers)
Pages: 32
Date: 2017-03
New Economics Papers: this item is included in nep-cta and nep-eur
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