Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/278960 
Year of Publication: 
2023
Series/Report no.: 
IZA Discussion Papers No. 16262
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
We study how changes in labor market regulation may trigger firm adjustments in skill demand. Leveraging rich administrative data from Italy, we investigate the effects of a reform that reduced firing costs for permanent employees and tightened temporary contracts' regulation to increase job stability. By using a difference-in-differences design, we document that the reform had unintended effects, inducing firms to increase layoffs of unskilled permanent employees and reducing hirings of unskilled workers on temporary contracts, but had no effect on skilled workers or permanent hirings. A theoretical search and matching model with heterogeneous skills and contract durations rationalizes our main findings.
Subjects: 
labor market regulation
employment protection
temporary work
skill demand
worker flows
JEL: 
J42
J63
J65
M53
Document Type: 
Working Paper

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