Edoardo Acabbi - Universidad Carlos III de Madrid

Abstract

Rigidities in firms' payroll adjustment amplify the impact of aggregate fluctuations on fundamentals. We analyze how firms use flexible contracts to decrease this pass-through. Leveraging unique Italian administrative data, we show that firms’ adoption of temporary contracts contributes to a reduction in their variability of cash flows and profits, particularly when their initial labor share is high. We then provide a causal identification of the effect for firms fundamental of a reform liberalizing the use of temporary contracts in 2001. We find that the liberalization of temporary contracts increased their adoption and led to a decline in average labor compensation. The reform translates into a substantial rise in profit margins and a reduction in the cross-sectional standard deviation of profits, but only among firms characterized by initially more rigid labor costs.

Additional information:

• Speaker: Edoardo Acabbi
• Time: Wednesday, 10.01.2024, 14:45 - 16:00
• Location: Faculty Lounge, Room 0.036 / Online via Zoom
  
  • Zoom-Link
• Further links:
  • Edoardo Acabbi's webpage
• Organizer: Finance Group
• Contact:
  • Almut Lunkenheimer
  • +49 228 73-9228
  • ifs@uni-bonn.de