Labor Market Regulation and Firm Adjustments in Skill Demand

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 16262

Classification and Topics

• Classification: Wirtschaft ; Monopsony; Segmented Labor Markets ; Labor Turnover; Vacancies; Layoffs ; Unemployment Insurance; Severance Pay; Plant Closings ; Personnel Economics: Training
• Subject: labor market regulation ; employment protection ; temporary work ; skill demand ; worker flows

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bottasso, Anna ; Bratti, Massimiliano ; Cardullo, Gabriele ; Conti, Maurizio ; Sulis, Giovanni
• Event: Veröffentlichung
• (who): Institute of Labor Economics (IZA)
• (where): Bonn
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/278960
• Last update: 10.03.2025, 11:42 AM CET