Firm's Level Labour Intensity in Italy after the Great Recession

Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 1

34 Pages Posted: 4 Oct 2017

See all articles by Enrico D'Elia

Enrico D'Elia

ISTAT

Alessandra Righi

National Institute of Statistics (Istat)

Date Written: March 31, 2017

Abstract

A special qualitative questionnaire attached to the Business Surveys carried on in February 2016 by Istat sheds some light on the labour demand after the Great Recession, also related to the output perspectives, the utilized productive capacity and the specific conditions and strategies of the firms. An ordered logit model is used to analyse the characteristics of the firms with different levels of employment response to a 10% permanent output increase. The first result is that the employment elasticity to output lies only between 0.10 and 0.25, with little differences by sector and firm’s size. It could be a sign that labour intensity of output is low and possibly reducing (and that productivity is increasing as well), or that jobs are created mainly by newborn firms (necessarily underrepresented in the survey sample). The estimated models also support the relevance of thresholds in firm’s behavior. For instance, capacity utilization and firm’s size apparently raise employment only if the former exceeds 80%-90% and the latter 50 employed persons. However, the heterogeneity among firms’ labour intensity remains huge even after controlling for many firm’s specific factors. It follows that one-size-fits-all incentives are expectedly inefficient.

Keywords: Ordered Logit Model, Labour Demand, Business Survey, Firm’s Level Data

JEL Classification: D22, J23

Suggested Citation

D'Elia, Enrico and Righi, Alessandra, Firm's Level Labour Intensity in Italy after the Great Recession (March 31, 2017). Government of the Italian Republic (Italy), Ministry of Economy and Finance, Department of the Treasury Working Paper No. 1, Available at SSRN: https://ssrn.com/abstract=3047241

Enrico D'Elia

ISTAT ( email )

via A. Depretis 74/B
Rome 00184
Italy

Alessandra Righi (Contact Author)

National Institute of Statistics (Istat) ( email )

Via Cesare Balbo 16
00184 Rome, 0185
Italy

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