Work in Progress

Temporary Contracts, Firm Heterogeneity and Regulation

Draft available soon

Abstract:

We study how firm heterogeneity interacts with the choice between permanent and temporary employment and different regulatory interventions.

First, we document a remarkable degree of variability in the share of temporary employees in the workforce, both across firms and over time.

We then show that this variability is associated with the response of firms to a reform that changed the regulation of temporary employment in Italy: firms that only partially relied on temporary jobs reacted by substituting between contract types, switching from temporary positions to permanent ones; firms with a higher share of temporary employees, instead, ended up destroying jobs with much higher frequency.

We turn to a search and matching model of the labor market with endogenous contract choice to rationalize these facts. In the model, firms hire workers using either a permanent or a temporary contract, based on their productivity and the expected duration of the production opportunity related to each job. Through the lens of the model we: (i) explain the empirical facts in a consistent framework; (ii) consider counterfactual scenarios, assessing the effects of regulation under different economic conditions.


Dignity by Decree? Temporary Jobs Reforms and Workers' Wages

Work in progress

Abstract:

In recent years, several European countries have modified their policies on fixed-term contracts, oscillating between liberalization and restriction in order to balance employment flexibility and job stability. We analyze a 2018 reform that tightened the legislation on temporary contracts in Italy, and examine its impact on wage dynamics. Our analysis, grounded in extensive administrative data covering the universe of dependent employees in Italy, reveals a sizeable decline in the starting wage of workers whose contract gets converted from fixed-term to permanent. We suggest two possible explanations for this decline. First, the new policy regime could induce changes in the composition of the pool of converters. Second, the decline in wages could be caused by a decrease in the surplus generated by each job, either through a direct increase in labor costs or through an increase in uncertainty about the quality of the worker. Our results suggest the existence of some degree of market power on the part of firms, with increased security for the workers being partly compensated by lower wages.


Firm Hierarchies in Space

Work in progress

Abstract:

We study the formation of hierarchies in firms that are active in multiple locations.