Earnings Instability and Tenure |
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Authors: | Lorenzo Cappellari Marco Leonardi |
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Institution: | 1. Catholic University of Milan, Italy;2. University of Milan, Italy |
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Abstract: | 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. |
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Keywords: | Earnings dynamics labor reforms permanent and transitory variance temporary contracts J21 J31 |
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