Are temporary jobs a port of entry into permanent employment? In this paper we argue that the answer crucially depends on the type of temporary contracts being considered, as the di¤erent contracts observed in practice are typically characterized by varying combinations of training, tax-incentives and EPL provisions. We base our empirical evidence on a longitudinal sample of labour market entrants in Italy, a country where a large number of temporary contracts coexist with a relatively high employment protection for standard employees. We estimate dynamic multinomial logit models with …xed e¤ects, to allow for non-random sorting of workers into the di¤erent types of contracts. We show that the transition to permanent employment is more likely for individuals holding any type of temporary contracts than for the unemployed, thus broadly con…rming the existence of port-of-entry e¤ects. Yet, not all temporary contracts are the same: training contracts are the best port of entry, while freelance contracts are the worst. We also show that temporary contracts are generally a port-of-entry into a permanent position within the same employer, but not across …rms, implying that little general-purpose training is gained while on temporary jobs. Moreover, the time needed for an internal transformation from a temporary to a permanent position appears rather long, suggesting that …rms are likely to use (a sequence of) temporary contracts as a cost-reduction strategy, rather than as a screening device for newly hired workers.

Employment Protection Legislation and the Size of Firms * The existing literature ignores the fact that in most European countries the strictness of Employment Protection Legislation (EPL) varies across the firm size distribution. In Italy firms are obliged to rehire an unfairly dismissed worker only if they employ more than 15 employees. Theoretically, the paper solves a baseline model of EPL with threshold effects, and shows that firms close to the threshold are characterized by an increase in inaction and by a reluctance to grow. Empirically, the paper estimates transition probability matrices on firm level employment using a longitudinal data set based on Italian Social Security (INPS) records, and finds two results. First, firms close to the 15 employees threshold experience an increase in persistence of 1.5 percent with respect to a baseline statistical model. Second, firms with 15 employees are more likely to move backward than upward. Finally, the paper tests the effect of a 1990 reform which tightened the regulation on individual dismissal only for small firms. It finds that the persistence of small firms relative to large firms increased significantly. Overall, these threshold effects are significant and robust, but quantitatively small.

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We show that the Italian wage curve, inexistent in the eighties and early nineties, has reemerged after the 1993 Income Policy Agreements, owing to the greater role granted to ‡exible and locally bargained top-up wage components.