Effects of Employment Protection and Product Market Regulations on the Italian Labor Market

37 Pages Posted: 15 Dec 2003

See all articles by Adriana D. Kugler

Adriana D. Kugler

McCourt School of Public Policy ; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; National Bureau of Economic Research (NBER)

Giovanni Pica

Idep, facoltà di economia; University of Milan - Department of Economics, Management and Quantitative Methods (DEMM); University of Milan - Centro Studi Luca d'Agliano (LdA); CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF)

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Date Written: December 2003

Abstract

Labor market regulations have often been blamed for high and persistent unemployment in Europe, but evidence on their impact remains mixed. More recently, attention has turned to the impact of product market regulations on employment growth. This paper analyzes how labor and product market regulations interact to affect turnover and employment. We present a matching model which illustrates how barriers to entry in the product market mitigate the impact of labor market deregulation. We, then, use the Italian Social Security employer employee panel to study the interaction between barriers to entry and dismissal costs. We exploit the fact that costs for unjust dismissals in Italy increased for firms below 15 employees relative to bigger firms after 1990. We find that the increase in dismissal costs after 1990 decreased accessions and separations in small relative to big firms, especially for women. Moreover, consistent with our model, we find evidence that the increase in dismissal costs had smaller effects on turnover for women in sectors faced with strict product market regulations.

Keywords: barriers to entry, costs of unjust dismissals, European unemployment

JEL Classification: E24, J63, J65, L11, L43

Suggested Citation

Kugler, Adriana Debora and Pica, Giovanni, Effects of Employment Protection and Product Market Regulations on the Italian Labor Market (December 2003). Available at SSRN: https://ssrn.com/abstract=477443 or http://dx.doi.org/10.2139/ssrn.477443

Adriana Debora Kugler (Contact Author)

McCourt School of Public Policy ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

IZA Institute of Labor Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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Giovanni Pica

Idep, facoltà di economia ( email )

Via Giuseppe Buffi 13
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Switzerland
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University of Milan - Department of Economics, Management and Quantitative Methods (DEMM) ( email )

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Milan, 20122
Italy

University of Milan - Centro Studi Luca d'Agliano (LdA) ( email )

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Milano, Mi 20122
Italy

CSEF - University of Naples Federico II - Centre for Studies in Economics and Finance (CSEF) ( email )

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Complesso Monte S. Angelo
Naples, Naples 80126
Italy

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