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

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 11339

Classification and Topics

• Classification: Wirtschaft ; Monopsony; Segmented Labor Markets ; Labor Turnover; Vacancies; Layoffs ; Unemployment Insurance; Severance Pay; Plant Closings ; Personnel Economics: Training
• Subject: employment protection legislation ; firing costs ; training ; Italy

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bratti, Massimiliano ; Conti, Maurizio ; Sulis, Giovanni
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/177143
• Last update: 10.03.2025, 11:44 AM CET