Employment protection legislation and mismatch: evidence from a reform

The aim of this paper is to assess the impact that the so-called Fornero Law had on the quality of the educational match contributing, thus, to a general debate on the effects of deregulation on the labor market and on skill mismatch in particular. The specific scope of the Fornero Law – limited only to companies of a certain dimension – allowed us to apply a DiD model using the Italian LFS pooled cross-section data over 14 yearly quarters. Our results show that, as an effect of the reform, the odds of educational match in companies with more than 15 employees has increased. This is consistent with economic theory that informed labor market deregulation during the last decades. However, these effects are not visible during the first year after the law’s enactment, but only during its second year, a likely consequence of workers’ turnover time. Robustness tests support our findings.