Temporary Employment, Job Flows and Productivity: A Tale of Two Reforms

Abstract

Temporary Employment, Job Flows and Productivity:A Tale of Two Reforms *We investigate the effects of two reforms of temporary employment using panel data on Italian firms. We exploit variation in their implementation across regions and sectors for identification. Our results show that the reform of apprenticeship contracts increased job turnover and induced the substitution of external staff with firms' apprentices, with an overall productivity-enhancing effect. The reform of fixed-term contracts instead did not produce the intended results: it induced a substitution of temporary employees in favour of external staff and reduced capital intensity, generating productivity losses. We estimate substitution elasticities across various types of temporary contracts that are consistent with this interpretation.

Job mobility and heterogeneous returns to apprenticeship training in Italy

“…Policy measures that target the young unemployed were introduced in Italy starting in the late 1990s through an incremental process based on the reduction in Employment Protection Legislation (EPL) for new hires (Cappellari et al., 2012; d'Agostino et al., 2018). The Pacchetto Treu (Law No.…”

“…Finally, at the end of the training period, apprentices received a certificate for the qualification they had attained. Despite the limitations to compliance with compulsory training obligations by firms (Cappellari et al., 2012), formal training and monitoring represented a commitment device for obliging firms in delivering training, whereas the certification provided a mechanism for the recognition of workers' occupational skills encouraging their effort during training (Acemoglu and Pischke, 2000).…”

“…We use this identification structure to generate a sample of graduates who were treated by the Biagi Law and experienced the new training scheme. Furthermore, as the introduction of the new apprenticeship is an independent event with respect to productive sectors and regions implementing the contract (Cappellari et al., 2012; d'Agostino et al., 2018), we can extend the procedure proposed by Wooldridge (2010) and estimate the following equation: $$\begin{eqnarray} y_{it}&=&\delta _{0}+\delta _{1} job\_sw_{it}+\delta _{2}(job\_sw_{it}\times biagi_{ia})+ \delta _{3} X_{it} \\ \nonumber &&+\delta _{4}Z_{ia}+ \gamma _{1} yg_{i}+\gamma _{2} reg_{i}+ \gamma _{3} year_{t}+ \phi _{it},\end{eqnarray}$$where $$biagi_{ia}$$ is a dummy variable that represents whether the employee was treated by the Biagi Law during apprenticeship. To estimate Equation (3), in line with Fitzenberger et al.…”

“…This paper also addsto the empirical literature on the effectiveness of alternative training schemes by providing evidence on the impact on post‐apprenticeship wages of a reform implemented in Italy in 2003 (the so‐called Biagi Law ), which lessened the stringency of the norms on the training content delivered by firms (Cappellari et al., 2012; Albanese et al., 2017; d'Agostino et al., 2018).…”

“…This is a novel contribution to the literature on the Italian case, which thus far has only investigated whether apprenticeship can boost the employability of youth workers and is an effective pathway into permanent jobs, compared to other forms of temporary work (Cappellari et al., 2012; Picchio and Staffolani, 2013; Albanese et al., 2017; Bosco and Valeriani, 2018; d'Agostino et al., 2018; Maida and Sonedda, 2019; Citino, 2020).…”