Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

• Autores: Federico Cingano, Marco Leonardi, Julián Messina, Giovanni Pica
• Localización: Economic journal, ISSN 0013-0133, Vol. 126, Nº 595, 2016, págs. 1798-1822
• Idioma: inglés
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• Dialnet Métricas: 2 Citas
• Resumen

  • This article estimates the causal impact of dismissal costs on capital deepening and productivity, exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for larger firms. We show that the rise in firing costs induced an increase in the capital-labour ratio and a decline in total factor productivity in small firms relative to larger firms. Our results indicate that capital deepening was more pronounced at the low-end of the capital distribution - where the reform hit arguably harder - and among firms endowed with a larger amount of liquid resources. We also find that stricter Employment Protection Legislation (EPL) raised the share of high-tenure workers, which suggests a complementarity between firm-specific human capital and physical capital in moderate EPL environments. [ABSTRACT FROM AUTHOR]