Employment protection and firm-provided training in dual labour markets

Abstract In this paper we leverage a labour market reform (Fornero Law) which reduced firing restrictions for open-ended contracts in the case of firms with more than 15 employees in Italy. The results from a Difference in Regression Discontinuities design demonstrate that after the reform, the number of trained workers increased in firms just above the threshold by approximately 1.5 additional workers. We show that this effect can be explained by the reduction in worker turnover and a higher use of permanent contracts. Our study highlights the potentially adverse effects of employment protection legislation on training in dual labour markets.