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Labor Market Regulation and Firm Adjustments in Skill Demand

Anna Bottasso (), Massimiliano Bratti, Gabriele Cardullo, Maurizio Conti () and Giovanni Sulis ()
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Anna Bottasso: University of Genoa
Maurizio Conti: University of Genoa

No 16262, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We study how changes in labor market regulation may trigger firm adjustments in skill demand. Leveraging rich administrative data from Italy, we investigate the effects of a reform that reduced firing costs for permanent employees and tightened temporary contracts' regulation to increase job stability. By using a difference-in-differences design, we document that the reform had unintended effects, inducing firms to increase layoffs of unskilled permanent employees and reducing hirings of unskilled workers on temporary contracts, but had no effect on skilled workers or permanent hirings. A theoretical search and matching model with heterogeneous skills and contract durations rationalizes our main findings.

Keywords: labor market regulation; employment protection; temporary work; skill demand; worker flows (search for similar items in EconPapers)
JEL-codes: J42 J63 J65 M53 (search for similar items in EconPapers)
Pages: 84 pages
Date: 2023-06
New Economics Papers: this item is included in nep-dge, nep-hrm and nep-lma
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