Employment protection and firm-provided training in dual labour markets

What is it about?

Leveraging a labour market reform that reduced employment protection for larger firms (above 15 employees) in Italy and a difference-in-discontinuities research design, we demonstrate that lower EPL increased firm-provided training after the reform. The main mechanism was a substitution of temporary with permanent workers, which generally receive more training. Before the reform, larger firms sought to escape the higher firing costs associated with employment protection by hiring workers with temporary contracts.

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Photo by Ben White on Unsplash

Photo by Ben White on Unsplash

Why is it important?

This is one of the few articles providing clean causal evidence on the effects of Employment Protection Legislation (EPL) on firm-provided training in "dual" labour markets, in which some workers (those hired with open-ended contracts) are highly protected while others enjoy much less employment protection.