Evaluating the Impact of Labour Market Regulation on the Size Growth of Firms

35 Pages Posted: 4 Jan 2005

See all articles by Massimo Mancini

Massimo Mancini

ISAE, Istituto di Studi e Analisi Economica

Carmine Pappalardo

ISTAT, Italian National Statistical Institute

Sergio de Nardis

Istituto di Studi e Analisi Economica (ISAE)

Date Written: December 20, 2004

Abstract

The Italian law on unfair firing (art. 18 of Statuto dei Lavoratori) discriminates according to whether the firm is below or above the threshold of 15 employees. In this paper we investigate the effects of the law on size growth of firms. The database consists of company level information collected by an ad hoc survey conducted by ISAE on a sample of industrial firms. The approach used is based on the methodology known as Regression Discontinuity Design. The analysis is built around two estimation exercises. In the first (sharp RDD), firms are assigned to the subset above (below) the threshold established by the law according to whether, in the base year, the total number of employees is greater or less than 15 (deterministic rule, rigid application of the law). In the second exercise, we introduce the hypothesis that the selection is partly stochastic because it is influenced by non-observable factors largely endogenous to the firms. The evidence of two empirical exercises indicates a negative impact of approximately 2% on the size growth of firms close to the threshold.

Keywords: SME, endogeneity, Regression Discontinuity Design, evaluation

JEL Classification: L25, L50

Suggested Citation

Mancini, Massimo and Pappalardo, Carmine and de Nardis, Sergio, Evaluating the Impact of Labour Market Regulation on the Size Growth of Firms (December 20, 2004). Available at SSRN: https://ssrn.com/abstract=637121 or http://dx.doi.org/10.2139/ssrn.637121

Massimo Mancini (Contact Author)

ISAE, Istituto di Studi e Analisi Economica ( email )

Piazza dell' Indipendenza 4
Roma, I-00185
Italy
+ 39 06 4448 2350 (Phone)
+39 06 4448 2249 (Fax)

Carmine Pappalardo

ISTAT, Italian National Statistical Institute ( email )

Piazza dell' Indipendenza 4
Roma, I-00185
Italy

Sergio De Nardis

Istituto di Studi e Analisi Economica (ISAE) ( email )

Piazza dell' Indipendenza 4
I-00185
Italy

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