SINTESI DI ROBERTO BASILE, SERGIO DE NARDIS

WP N. 40

NON-LINEARITIES AND FIRM SIZE DYNAMICS IN ITALIY

 

ABSTRACT

 

Using a balanced longitudinal data set on Italian manufacturing firms born in 1996 and active in 2000, we analyse the firm size dynamics. The aim is to assess the presence of non-linearities and/or discontinuities in the growth behaviour generated by the employment protection legislation (EPL), which is much stricter for firms with more than 15 employees (“articolo 18 Statuto dei Lavoratori”). Local regression estimates suggest that firms with an initial size close to 15 employees are more reluctant to grow. Furthermore, conditional density estimates show that firms close to the 15 employees threshold are more likely to move backward than upward with respect to this threshold. We interpret these results as a necessary but not sufficient evidence of a negative effect of the EPL. Indeed, they could also be consistent with optimal choices of growth behaviour regardless the strictness of EPL.

 

 

 

 

 

 

 

JEL Classification: L11, L60, J4, C14

 

Keywords: Firm growth, Gibrat’s Law, Italy, Non-linearities, Discontinuity, Conditional Density.