Labour market reforms increasing flexibility at the margin have been recently paying out in terms of employment growth. This article argues that two-tier labour market reforms have a transitional honeymoon, job creating effect. In a dynamic model of labour demand under uncertainty, the article predicts that in the aftermath of reforms, beyond an increase in employment, there should be a reduction in employment inaction and in the mean and cross-sectional variance of labour productivity. Based on a variety of firm-level data on Italy in the period 1995–2000, we find evidence of our empirical implications.

Two Tier Reforms of Employment Protection. A Honeymoon effect?

GARIBALDI, Pietro
2007-01-01

Abstract

Labour market reforms increasing flexibility at the margin have been recently paying out in terms of employment growth. This article argues that two-tier labour market reforms have a transitional honeymoon, job creating effect. In a dynamic model of labour demand under uncertainty, the article predicts that in the aftermath of reforms, beyond an increase in employment, there should be a reduction in employment inaction and in the mean and cross-sectional variance of labour productivity. Based on a variety of firm-level data on Italy in the period 1995–2000, we find evidence of our empirical implications.
2007
117 No 521
357
385
Tito Boeri; Pietro Garibaldi
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2318/138169
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