Flexible employment, job flows and labour productivity

Marco Leonardi 2, Carlo Dell’Aringa1, Lorenzo Cappellari1
1UniversitÓ Cattolica Milano, Italy, 2UniversitÓ di Milano, Italy

In this paper we aim at providing evidence on the effects of flexible employment on job flows and labour productivity. We use panel data on firms with balance sheet information together with a detailed account of the type and number of employment contracts used by the firm. As a source of identification, we exploit variation in the legislation that affects the costs of using fixed-term and apprenticeships contracts over regions and industries. Based on these institutional changes, we can set up a difference-in-difference framework for estimation. We consider the impacts of these institutional changes on employment flows. Next, we assess their impact on labour productivity and investments. Results indicate that the reform of apprenticeships seems to have been successful in increasing turnover of workers capital-labor substitution in favour of labor, with an overall productivity-enhancing effect. Changes in fixed-term contracts instead do not seem to have had the intended results, i.e. may have made the use of these contracts more costly rather than less costly as already pointed out by some literature in labor law.

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