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Employment protection, temporary contracts and firm-provided training: Evidence from Italy

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

No 2018-02, Working Papers from Joint Research Centre, European Commission (Ispra site)

Abstract: In this study we leverage on Italy’s size-contingent firing restrictions in order 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 firms’ incentives to invest in workers’ training. The number of trained workers falls by about 1.5-1.9 units at the threshold: this is a non-negligible effect, corresponding to a 16-20 per cent reduction in the number of trained workers. The results are robust to several sensitivity checks and controls for potential confounding factors (e.g., worker councils). The EPL effect on training is not mediated by different levels of investment in physical capital or propensities to innovate, while it is mostly accounted for by larger workers’ turnover and use of temporary contracts, which entail lower training, in firms with higher firing costs. Our study points to potential adverse effects of EPL on workers’ training in dual labor markets, owing to larger firms seeking to avoid higher EPL costs by means of temporary contracts.

Keywords: employment protection legislation; firing costs; training; Italy (search for similar items in EconPapers)
JEL-codes: J24 J63 J65 M53 (search for similar items in EconPapers)
Date: 2018-02
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Published by Publications office of the European Union, 2018

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Related works:
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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