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This paper investigates whether exposure to academically gifted peers of the same and opposite gender in primary school (grade 5, at age 10) affects later academic achievement (grade 8, at age 13) and high-school track choice. For identification we exploit random allocation of kids across classes within primary schools. We document that, conditional on primary school fixed effects and grade 8 class fixed effects, as well as on baseline achievement, a higher share of same/opposite- gender high-achievers in math in primary school is related, both for boys and girls, to better/worse later math academic achievement in grade 8 and to a higher/lower probability of choosing a scientific high-school track. We argue that these results are consistent with a role model channel.

Entry in many occupations is regulated with the objective to screen out the least able producers and guarantee high quality of output. Unfortunately, the available empirical evidence suggests that in most cases these objectives are not achieved. In this paper we investigate entry into the legal profession in Italy and we document that such a failure is due to the combination of the incomplete anonymity of the entry exam and the intergenerational transmission of business opportunities. We use microdata covering the universe of law school graduates from 2007 to 2013 matched with their careers and earnings up to 5 years after graduation. Variation generated by the random assignment of the entry exam grading commissions allows us to identify the role of family ties in the selection process. We find that connected candidates, i.e. those with relatives already active in the profession, are more likely to pass the exam and eventually earn more, especially those who performed poorly in law school. When we simulate the process of occupational choice assuming family connections did not matter, we find that strong positive selection on ability would emerge.

We analyse theoretically and empirically the effects on young people’s labour market outcomes of two specific labour market institutions and their interaction: employment protection legislation and active labour market policy. The paper examines recent policy reforms in Italy focussing on the impact of the 2012 Fornero reforms of employment protection legislation as well as the initial impact of the EU-wide Youth Guarantee scheme introduced in Italy in March 2014. The paper then examines how these two policy reforms interacted. The analysis first confirms the finding that the Fornero reform increased permanent hires particularly amongst the very youngest workers; it then goes on to find that the YG was indeed successful in increasing the hires of young people, although this operated through a statistically significant increase in female hires on temporary contracts. Third, it finds some evidence of a dampening effect of the YG on EPL reforms as predicted by theory.

We study the distributional effects of globalization within a model of heterogeneous agents where both managerial talent and knowledge of the local economic environment are required in order to set up a firm in a given country. Therefore, agents willing to set up a firm in a foreign country need to incur a learning cost that depends on how different is the foreign entrepreneurial environments from the domestic one. In this context, we show that globalization fosters FDI and raises wages, output and productivity. Moreover, it benefits workers and highly talented multinational entrepreneurs, while harming low-ability domestic producers. The effects of openness follow from highly efficient foreign entrepreneurs driving inefficient local firms out of the market. We provide empirical evidence consistent with the implications of the model, showing a significant negative effect of the distance between nationwide regulations indexes on bilateral FDI flows.

We apply a novel measure of intergenerational mobility (IM) developed by Guell, Rodriguez Mora, and Telmer (2014) to a rich combination of Italian data allowing us to produce comparable measures of IM of income for 103 Italian provinces. We then exploit the large heterogeneity across Italian provinces in terms of economic and social outcomes to explore how IM correlates with a variety of outcomes. We find that (i) higher IM is positively associated with a variety of "good" economic outcomes, such as higher value added per capita, higher employment, lower unemployment, higher schooling and higher openness and (ii) that also within Italy the "the Great Gatsby Curve" exists: in provinces in which mobility is lower cross-sectional income inequality is larger. We finally explore the correlation between IM and several socio-political outcomes, such as crime and life expectancy, but we do not find any clear systematic relationship on this respect.

This paper estimates the causal impact of dismissal costs on capital deepening and productivity exploiting a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving ring costs unchanged for larger firms. We show that the increase in firing costs induces an increase in the capital-labour ratio and a decline in total factor productivity in small firms relativeto larger firms after the reform. Our results indicate that capital deepening is more pronounced at the low-end of the capital distribution - where the reform hit arguably harder - and among firms endowed with a larger amount of liquid resources. We also find that stricter EPL raises the share of high-tenure workers, which suggests a complementarity between firm-specific human capital and physical capital in moderate EPL environments.

Employment protection may affect both productivity and capital investment because higher adjustments costs hamper allocative efficiency and may therefore affect both the optimal capital labor input mix and total factor productivity. To estimate the impact of dismissal costs on capital deepening and productivity we exploit a reform that introduced unjust-dismissal costs in Italy for firms below 15 employees, leaving firing costs unchanged for bigger firms. We provide evidence that the increase in firing costs induced capital deepening and a decline in total factor productivity in small firms relative to larger firms after the reform. We also find that capital deepening is more pronounced at the low-end of the capital distribution – where the reform arguably hit harder – and among firms endowed with a larger amount of liquid resources, that have more room to react thanks to an easier access to the credit market. Our results also indicate that the EPL reform reduced the probability to access the credit market, possbily because stricter EPL reduces both the value of the firm and the amount of internal resources that the firm can pledge as collateral against lenders.

We provide evidence suggesting that incumbents’ access to group deep pockets has a negative impact on entry in product markets. Relying on a unique French data set on business groups, our paper presents three major findings. First, the amount of cash holdings owned by incumbent-affiliated groups is negatively related to entry in a market. Second, the impact on entry of group deep pockets is more important in markets where access to external funding is likely to be more difficult. Third, the “entry deterring effect” of group deep pockets is more pronounced when groups have more active internal capital markets. Our findings suggest that internal capital markets operate within corporate groups and that they have a potential anti-competitive effect.

We study the distributional effects of globalization within a model of heterogeneous agents where both managerial talent and knowledge of the local economic environment are required in order to become a successful entrepreneur. Agents willing to set up a firm abroad incur a learning cost that depends on how different the foreign and domestic entrepreneurial environments are. In this context, we show that globalization fosters FDI and raises wages, output and productivity. However, not everybody wins. The steady state relationship between globalization and income is U-shaped: high- and low-income agents are better off in a globalized world, while middle-income agents (domestic entrepreneurs) are worse off. Thus, consistently with recent empirical evidence, the model predicts globalization to increase inequality at the top of the income distribution while decreasing it at the bottom.

Estimating the effect of aging on productivity requires clean measures of productivity. Additionally, one needs to control for unobserved heterogeneity at the worker, firm and worker/firm level, to account for the role of experience and to correct for selection bias. We tackle these issues exploiting a panel of Gran Prix Formula One drivers, which provides a unique setting to single out the data requirements needed to credibly estimate the effect of age on productivity. Results robust to the inclusion of worker, firm and match effects show that the age-productivity link has an inverted U-shape profile with a peak at the age of 30–32. The use of repeated cross-sections of individuals also produces consistent results provided that cohort effects are properly accounted for. Relying on team-average measures of productivity makes instead inference harder.

This paper analyzes the joint effect of EPL and financial market imperfections on investment, capital-labour substitution, labour productivity and job reallocation in a cross-country framework. In the spirit of Rajan and Zingales (1998) and Ciccone and Papaioannou (2006), we exploit variation in the need for reallocation at the sectoral and aggregate level to assess the average effect of EPL on firms’ policies. Then, exploiting firm-level information we study if the effect of EPL is stronger in firms with lower levels of internal resources. We find that, on average, EPL reduces investment per worker, capital per worker and value added per worker in high reallocation sectors relative to low reallocation sectors. The reduction in the capital-labour ratio is less pronounced in firms with higher internal resources, suggesting that financial constraints exacerbate the negative effects of EPL on capital deepening.

This paper uses the Italian Social Security employer-employee panel to study the effects of the Italian reform of 1990 on worker and job flows. We exploit the fact that this reform increased unjust dismissal costs for businesses below 15 employees, while leaving dismissal costs unchanged for bigger businesses, to set up a natural experiment research design. We find that the increase in dismissal costs decreased accessions and separations for workers in small relative to large firms, especially in sectors with higher employment volatility, with a negligible impact on net employment. We also find some evidence suggesting that the reform reduced firms' entry rates and employment adjustments, but had no effect on exit rates.

This paper explores how the political support for Labor Market Regulation (LMR) is affected by economic and political integration in a two-country overlapping generations model where countries behave strategically. We model LMR as wage regulation and analyze three institutional settings: Autarchy, Economic Union and Political Union. We show that, if the economy is dynamically efficient, the support for labor regulation is lower in the Economic Union - characterized by capital mobility - than in Autarchy. This decreases the welfare of the owners of the less mobile factor (labor) even in a setting where today workers are next period capitalists. A Political Union restores, under symmetry, the autarchic outcomes and welfare levels. The asymmetric case is also analyzed.

Labor market regulations have often being blamed for high and persistent unemployment in Europe, but evidence on their impact remains mixed. More recently, attention has turned to the impact of product market regulations on employment growth. This paper analyzes how labor and product market regulations interact to affect turnover and employment. We present a matching model which illustrates how barriers to entry in the product market mitigate the impact of labor market deregulation. We, then, use the Italian Social Security employer-employee panel to study the interaction between barriers to entry and dismissal costs. We exploit the fact that costs for unjust dismissals in Italy increased for firms below 15 employees relative to bigger firms after 1990. We find that the increase in dismissal costs after 1990 decreased accessions and separations in small relative to big firms, especially for women. Moreover, consistent with our model, we find evidence that the increase in dismissal costs had smaller effects on turnover for women in sectors faced with strict product market regulations.