The impact of temporary employment and employment protection on labour productivity : evidence from an industry-level panel of EU countries

"In recent years the availability of new industry-level data allowed to evaluate the impact of labour market policies more consistently than previous standard cross-country studies. In this paper an industry-level panel is exploited to evaluate the impact of Employment Protection Legislation (EPL) for temporary employment (TE), along with permanent employment (PE), in EU countries. Indeed, the advantage of using industry-level data is manifold. The method exploits both cross-country variation in EPL for PE and TE and variation in the relevance of EPL in different industries deriving from a particular diff-in-diff assumption. Differently from the previous literature we apply this idea of the different binding of EPL only for PE, whereas we implement a different strategy for TE which should imply a more accurate identification of the effect of the use of TE on labour productivity. The theoretical literature has not established a clear prediction on the sign of the effects, existing different convincing reasons for both directions. Thus, the results of the analysis have potentially important policy implications. Our main finding is that the use of temporary contracts has a negative, even if small in magnitude, effect on labour productivity. Furthermore, the analysis confirms that EPL for regular contracts reduce labour productivity growth more in those industries requiring a greater employment reallocation." (Author's abstract, IAB-Doku) ((en))