Evaluating The Impact of Labour Market Regulation on the Size Growth of Italian Firms

The Italian law on "unfair firing" (art. 18 of "Statuto dei Lavoratori") discriminates according to whether the firm is below or above the threshold of 15 employees. In this paper, we investigate the effects of this setting on average growth rates of small firms using a Regression Discontinuity Design approach. Firms are assigned to the subset above (below) the threshold set up by the law if in the base year the total number of employees is greater or less than 15. The database consists of firm level information collected by ISAE through a sample of industrial firms. The empirical evidence does not indicate a statistically significant impact of the law on the size growth of firms close to the threshold.