Federico Cingano

Service Regulation and Growth: Evidence from OECD Countries

We study the effects of anti�?competitive service regulation by examining whether OECD countries with less anti�?competitive regulation see better economic performance in manufacturing industries that use less�?regulated services more intensively. Our results indicate that lower service regulation increases value added, productivity and export growth in downstream service�?intensive industries. The regulation of professional services and energy provision has particularly strong negative growth effects. Our estimates are robust to accounting for alternative forms of regulation (i.e. product and labour market regulation), alternative measures of financial development and a range of other specification checks.

Politicians at Work: The Private Returns and Social Costs of Political Connections

We quantify the private returns and social costs of political connections exploiting a unique longitudinal dataset that combines matched employer-employee data for a representative sample of Italian firms with administrative archives on the universe of individuals appointed in local governments over the period 1985-97. According to our results, the revenue premium granted by political connections amounts to 5% on average, it is obtained through changes in domestic sales but not in exports, and it is not related to improvements in firm productivity. The connection premium is positive for upstream producers for the public administration only, and larger (up to 25%) in areas characterized by high public expenditure and high levels of corruption. These findings suggest that the gains in market power derive from public demand shifts towards politically connected firms. We estimate such shifts reduce the provision of public goods by approximately 20%.

The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU Countries

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.

Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy

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, possibly 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.

Trust, Firm Organization and the Structure of Production

Interpersonal trust favors the expansion of organizations by allowing the delegation of decisions and tasks among anonymous others or people that interact only infrequently. We document these facts for a representative survey of Italian manufacturing firms and use this source of data to construct an industry-specific measure of need-for-delegation in production. We then show that trust shapes comparative advantage, as high-trust regions and countries exhibit larger value added and export shares in delegation-intensive industries relative to other industries. Such effects are associated with an increase in average firm size, while the number of firms is not significantly affected. Larger average size reflects in turn a shift of the distribution away from the smallest firms, consistently with the idea that trust allows organizations to expand beyond the narrow circle of family members and close friends.

Before It Gets Better: The Short-Term Employment Costs of Regulatory Reforms

The article exploits long time series of industry-level data in a group of OECD countries to analyze the short-term labor market effects of reforms that lower barriers to entry and dismissal costs. Estimates show that both policies induce non-negligible transitory employment losses. The strength of these effects varies depending on the underlying industry and labor market structure, and on cyclical conditions: The employment cost of deregulation is higher in economic downturns and negligible in good times. These findings prove robust to a set of specification and sensitivity checks and are confirmed after standard reverse causality and falsification tests.