Earnings Instability and Tenure

We study the effect of tenure on earnings instability in Italy using the reforms of temporary employment contracts, which affected the average tenure of workers differentially across cohorts. We develop a model of earnings dynamics, and we exploit the variation of tenure and instability over time an...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2016-04, Vol.118 (2), p.202-234
Main Authors: Cappellari, Lorenzo, Leonardi, Marco
Format: Article
Language:English
Subjects:
Earnings
Earnings dynamics
Economic reform
Economic theory
J21
J31
Labor contracts
Labor economics
labor reforms
Labour contract
Labour economics
permanent and transitory variance
Studies
temporary contracts
Tenure
Wages & salaries
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Summary:We study the effect of tenure on earnings instability in Italy using the reforms of temporary employment contracts, which affected the average tenure of workers differentially across cohorts. We develop a model of earnings dynamics, and we exploit the variation of tenure and instability over time and across birth cohorts to estimate policy-relevant parameters. Our results indicate that each year of tenure on the job reduces earnings instability by 11 percent; the drop is faster in the first three years of the match. Workers on a temporary contract have an earnings instability up to 100 percent higher than workers on a permanent contract.
ISSN:0347-0520
1467-9442
DOI:10.1111/sjoe.12142