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Employment Protection, Temporary Contracts and Firm-Provided Training: Evidence from Italy

Massimiliano Bratti, Maurizio Conti () and Giovanni Sulis ()

No 11339, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this study, we leverage on Italy's size-contingent firing restrictions to identify the causal effect of employment protection legislation (EPL) on firm-provided training using a regression discontinuity design. Our analysis demonstrates that higher levels of EPL reduce incentives for firms to invest in workers' training. The number of trained workers falls by about 1.5-1.9 units at the threshold: this is not a negligible effect, corresponding to a 16-20% reduction in the number of trained workers. The results are robust to several sensitivity checks and controls for potential confounding factors (e.g. work councils). The effect of EPL on training is not mediated by different levels of investment in physical capital or propensities to innovate, while it is mostly accounted for by higher worker turnover and more use of temporary contracts, which entail less training, in firms with higher firing costs. Our study highlights the potential adverse effects of EPL on worker training in dual labour markets, owing to larger firms seeking to avoid the higher costs of EPL by means of temporary contracts.

Keywords: employment protection legislation; firing costs; training; Italy (search for similar items in EconPapers)
JEL-codes: J42 J63 J65 M53 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lma
Date: 2018-02
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Working Paper: Employment Protection, Temporary Contracts and Firm-provided Training: Evidence from Italy (2018) Downloads
Working Paper: Employment protection, temporary contracts and firm-provided training: Evidence from Italy (2018) Downloads
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