Working Paper: NBER ID: w11658
Authors: Adriana Kugler; Giovanni Pica
Abstract: This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for firms below 15 employees, while leaving dismissal costs unchanged for bigger firms, to set up a natural experiment research design. We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to big firms, especially in sectors with higher employment volatility. Moreover, we find that the reform reduced firms' employment adjustments on the internal margin as well as entry rates while increasing exit rates.
Keywords: employment protection; worker flows; job flows; Italian reform
JEL Codes: E24; J63; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased dismissal costs (J32) | decrease in accessions (H56) |
| increased dismissal costs (J32) | decrease in separations (J63) |
| increased dismissal costs (J32) | reduced labor mobility (J69) |
| increased dismissal costs (J32) | reduced employment adjustments on internal margin (F16) |
| increased dismissal costs (J32) | affected entry and exit rates (J63) |
| 1990 reform (P21) | decrease in employment changes in small firms (J23) |
| increased dismissal costs (J32) | decrease in labor market dynamics (J29) |
| 1990 reform (P21) | varying effects by sectoral characteristics (L52) |