Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/51892
Authors: 
Leonardi, Marco
Pica, Giovanni
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5335
Abstract: 
Theory predicts that the wage effects of government-mandated severance payments depend on workers' and firms' relative bargaining power. This paper estimates the effect of employment protection legislation (EPL) on workers' individual wages in a quasi-experimental setting, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees and left firing costs unchanged for bigger firms. Accounting for the endogeneity of the treatment status, we find that high-bargaining power workers (stayers, white collar and workers above 45) are almost left unaffected by the increase in EPL, while low-bargaining power workers (movers, blue collar and young workers) suffer a drop both in the wage level and its growth rate.
Subjects: 
costs of unjust dismissals
severance payments
policy evaluation
endogeneity of treatment status
JEL: 
E24
J3
J65
Document Type: 
Working Paper

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