Reforms, Labour Market Functioning and Productivity Dynamics: A Sectoral Analysis for Italy

41 Pages Posted: 25 Apr 2011

See all articles by Cecilia Jona Lasinio

Cecilia Jona Lasinio

Italian Statistical Institute

Giovanna Vallanti

London School of Economics & Political Science (LSE)

Date Written: April 22, 2011

Abstract

Over the last two decades Italy registered notable improvements in the functioning of labour market. However, such improvements have been accompanied by a deterioration in terms of productivity and competitiveness. This paper provides some evidence in this respect evaluating to what extent labour market reforms might have influenced the poor productivity performance of the Italian economy over the period 1980-2008. We show that labour market deregulation had a negative effect on aggregate labour productivity through both the within and the reallocative components. Our results show that the increased flexibility in the use of temporary contract has led to a lower productivity (level and to a lesser extent growth rate) in all sectors, with a higher impact on those industries with a higher flexibility need. Conversely, the use of temporary contracts has a significant lower effect in industries with higher skill content. The negative effect of the reforms on the reallocative capacity is stronger in those industries with a higher flexibility need that are also the relatively lower productivity sectors in the period 1993-2008.

Suggested Citation

Jona Lasinio, Cecilia and Vallanti, Giovanna, Reforms, Labour Market Functioning and Productivity Dynamics: A Sectoral Analysis for Italy (April 22, 2011). Available at SSRN: https://ssrn.com/abstract=1818854 or http://dx.doi.org/10.2139/ssrn.1818854

Cecilia Jona Lasinio (Contact Author)

Italian Statistical Institute ( email )

Via Cesare Balbo , 16
Rome
Italy

Giovanna Vallanti

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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