The Impact of Labour Market Partial Reforms on Workers’ Productivity: The Italian Case

According to a widespread point of view, flexibility in the labour market is considered a means to fight unemployment and to increase labour productivity. But if flexibility is introduced into the system at the margin (only for new contracts) then its effect may be ambiguous and even perverse as Blanchard and Landier (2002) argued. This work follows this strand and demonstrates that partial reforms do not necessarily stimulate diligence of workers. If there is a large amount of protected workers, flexible workers may perceive that diligence does not worth. Estimates with Italian data are presented and confirm this theoretical argumentation.