Employment protection and regional worker flows in Italy

Naticchioni, Paolo and Rustichelli, Emiliano and Scialà, Antonio (2006): Employment protection and regional worker flows in Italy. Forthcoming in: Economia Politica , Vol. 13, No. 3 (November 2006)

Abstract

In this paper we point out that the theoretical predictions concern-ing Employment Protection Legislation (EPL) are not fully confirmed by empirical evidence in Italy, a strict EPL country in the nine-ties, according to OECD indexes. In particular, worker and job flow rates are remarkably high, also in comparison with the other Euro-pean countries. Furthermore, the differences in regional worker flow rates -computed on both the social security database and the LFS- are relevant, no matter which measure of worker flows is considered. While EPL is the same across regions, the highest worker flow rates are observed in the South, an area generally recognised as the least dynamic of the country, followed by the Northeast, the Centre and the Northwest. For possible alternative explanations of regional differences investigation focuses on economic structural composi-tion, the black labour market, non-standard contracts, the public sector and self-employment incidence, labour productivity and firm seniority. Using Logit estimates we find that none of these factors can fully explain these differences. Moreover, the predicted nega-tive relation between worker flows and unemployment duration does not seem to hold in the case of Italy.

• Item Type: MPRA Paper
• Institution: Dipartimento di Scienze Economiche - La Sapienza - Rome
• Language: English
• Keywords: Worker Turnover and Reallocation; Employment Protection; Regional Economics; Italy
• Subjects: J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J65 - Unemployment Insurance ; Severance Pay ; Plant Closings; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J68 - Public Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J63 - Turnover ; Vacancies ; Layoffs

References

 Anderson P. - Meyer B. (1994), The extent and Consequences of Job Turnover, Brooking Papers on Economic Activity, Microeconomics, pages. 177-236.  Baldassarini A. - Pascarella C. (2003), The Italian approach to estimating the extent of the Non-Observed Economy: methods and re-sults at a national and regional dimension”, paper presented at the AIEL 2003 conference.  Belot M. - Boone J. - van Ours J. (2002), Welfare effects of em-ployment protection, CEPR, Discussion Paper no. 3396.  Bentolila B. - Bertola G. (1990), Firing Cost and Labour Demand: How bad is Eurosclerosis?, Review of Economic Studies, 57, pp. 381-402.  Bertola G - Rogerson R. (1997), Institutions and labour reallo-cation, European Economic Review, June, 41(6), pp.1147-71.  Bertola G. (2004), A Pure Theory of Job Stability and Labour In-come Risk, Review of Economic Studies, vol.71, pp.43-61.  Bertola G. - Blau F.D. - Kahn L.M. (2002), Labour Market Insti-tutions and Demographic Employment Patterns, NBER DP no. 9043.  Blanchard O.J. - Diamond P. (1990), The cyclical behaviour of gross flows of US workers,Brookings Papers on Economics Activ-ity,2,pp.85-143.  Blanchard O.J. - Portugal P. (2001), What hides Behind an Unem-ployment Rate: Comparing Portuguese and U.S. Labor Markets, American Economic Review, vol.91, no.1.  Blanchard O.J. - Wolfers J. (2000), The Role of Shocks and In-stitutions in the rise of European Unemployment: the Aggregate Evi-dence, Economic Journal, March, C1-C33.  Blanchard O.J. - Tirole J. (2004), The Optimal Design of Unem-ployment Insurance and Employment Protection: a first pass, MIT, De-partment of Economics, working paper no. 04-15.  Boeri T. (1996), Is Job Turnover Countercyclical?, Journal of Labour Economics, 14(4), pp. 603-25.  Boeri T. - Garibaldi P. (2002), Shadow activities and unemploy-ment in a depressed labour market, CEPR DP, no. 3433.  Bruno S. (1979), The industrial reserve army and the italian la-bour market, Cambridge Journal of Economics, n. 2.  Cahuc P. – Zylberberg, A. (2004), Labour Economics, Cambridge (MA), MIT Press.  Centra M. - Discenza A. R. - Rustichelli E. (2001), Strumenti per le analisi di flusso nel mercato del lavoro - Una procedura per la ricostruzione della struttura longitudinale della Rilevazione tri-mestrale Istat sulle forze del lavoro, Isfol, Monografie sul Mercato del lavoro e le politiche per l’impiego, n. 2/2001, Roma (abstract in english).  Contini B. (2002), ed., Labour Mobility and wage dynamics, Torino, Rosemberg & Sellier publishing.  Contini B. - Trivellato U. (2006), ed., Eppur si Muove: dinami-che e persistenze del mercato del lavoro italiano, Bologna, Il Muli-no.  Davis S. - Haltiwanger J. (1995), Measuring Worker and Job Flows, NBER, Working Paper No. 5133.  Davis S. - Haltiwanger J.C. - Schuh S. (1996), Job creation and destruction, Cambridge (MA), MIT Press,.  Feldstein M. (1976), Temporary Layoff in the Theory of Unemploy-ment, Journal of Political Economy, vol.5, pp. 937-958.  Garibaldi P. - Pacelli L. (2004), Do Larger Severance Payments Increase Job Duration?, CEPR Discussion Paper, no. 4607.  Gomez-Salvador R. - Messina J. - Vallante G. (2004), Gross job flows and institutions in Europe, Labour Economics, vol.11,4,pp.469-86.  Ichino A. - Polo M. - Rettore E. (2003), Are Judges Biased by Labour Market Conditions? The Selection of Firing Litigations for Trial in an Italian Firm, European Economic Review, vol.47, no.5, pp.913-944.  Kruppe T. (2001), Assessing labour market dynamics: European evidence, ILO Employment paper, no.15.  Leombruni R - Quaranta R. (2002), Worker mobility: structural changes and cyclical behaviour, in Contini B. (a cura di), Labour Mo-bility and wage dynamics, Torino, Rosemberg & Sellier publishing.  Mortensen D. - Pissarides C. (1994), Job Creation and Job De-struction in the Theory of Unemployment, Review of economic studies, 61, pp.397-415.  Naticchioni P. - Rustichelli E. - Scialà, A. (2003), Employment Protection and Regional Worker Flows in Italy: an Assessment of the theoretical Predictions, DSE-ISFOL Discussion Paper, n.1.  Nickell S. - R. Layard (1999), Labor market institutions and economic performance, in Ashenfelter, O. and D. Card (Eds.), Handbook of Labor Economics, Amsterdam, North Holland.  OECD (1994), The OECD Jobs Study, Paris, OECD.  OECD, (1999), Employment protection and labor market perform-ance, in Employment Outlook, Paris.  OECD, (2004), Employment protection and labor market perform-ance, in Employment Outlook, Paris.  Pirrone, S., Sestito, P. (2006), La disoccupazione in Italia: Tra Stato, Regioni e cacciatori di teste, Il mulino, Bologna.  Pissarides, C. (2000), Equilibrium unemployment theory, 2nd edi-tion, Cambridge (MA), MIT Press.  Pissarides, C. (2001), “Employment Protection”, Labour Economics (8), pp. 131-159.  Ricci A. - Waldmann (2006), Employment Protection and firm fi-nanced training: a theoretical analysis, CEIS WP, no.230.