Employment Protection Legislation and Mismatch: Evidence from a Reform

29 Pages Posted: 31 Aug 2017

See all articles by Fabio Berton

Fabio Berton

University of Turin

Francesco Devicienti

University of Turin - Collegio Carlo Alberto; University of Turin - Department of Economics and Financial Sciences G. Prato

Sara Grubanov-Boskovic

Joint Research Center of the European Commission

Abstract

Liberalization of temporary contracts has been a hallmark of labor market reforms during the last decades. More recently, factors like the sovereign debt crisis pushed the most indebted countries to unprecedented reductions of employment protection legislation (EPL) also on open-ended contracts. These policies are justified under the assumption that EPL harms the allocation of workers on the jobs where they are most productive. How EPL affects the quality of job matches is nonetheless an underexplored issue. In this paper, we provide new evidence that exploits exactly one of these recent reforms, the so-called Fornero Law, introduced in Italy in 2012 in the background of austerity reforms. Results show that good matches have increased. Further, the reduction in EP favored labor reallocation. Eventually, it was also followed by an increase in productivity, albeit small. While the results are consistent with the economic theory that informed deregulation, we highlight caveats and limitations.

Keywords: employment protection legislation, turnover, mismatch, productivity, Fornero Law, difference-in-differences

JEL Classification: J24, J63

Suggested Citation

Berton, Fabio and Devicienti, Francesco and Grubanov-Boskovic, Sara, Employment Protection Legislation and Mismatch: Evidence from a Reform. IZA Discussion Paper No. 10904. Available at SSRN: https://ssrn.com/abstract=3029774

Fabio Berton (Contact Author)

University of Turin ( email )

218 bis
Corso Unione Sovietica
Torino, 10134
Italy

Francesco Devicienti

University of Turin - Collegio Carlo Alberto ( email )

via Real Collegio 30
Moncalieri, Torino 10024
Italy

University of Turin - Department of Economics and Financial Sciences G. Prato ( email )

C. so Unione Sovietica, 218 Bis
Torino, 13820-4020
Italy

Sara Grubanov-Boskovic

Joint Research Center of the European Commission

Via E. Fermi 2749
Ispra (VA), I-21027
Italy

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
31
Abstract Views
213
PlumX Metrics