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EXODUS Report Summary

Project ID: 322305
Funded under: FP7-PEOPLE
Country: Italy

Periodic Report Summary 1 - EXODUS (Emigration of High-Skilled Individuals due to Short-Term Contracts)

In the past two decades, as part of the European wave of labour market deregulations, new employment contracts, characterized by fixed length and flexible employment regulation, have been introduced in Italy. This strategy to increase the flexibility of the labour market has been implemented at the margin (dual-track reforms), without affecting those hired on “regular” contracts, who are still protected by high job security. Deregulation has therefore affected mainly young cohorts, leaving unchanged the situation of the core, insider, permanent workers. Theoretically, the utilization of short-term contracts could help increase labor force participation, employment, efficiency and labour market opportunities. However, if not regulated in integration with the specific institutional framework, short-term contracts, which are usually associated with less rigid employment protection legislation (EPL), might generate undesired effects. By promoting adverse selection, driving the better workers away from the mother country, as the less productive workers are less mobile and more willing to take up temporary forms of employment, short-term contracts might actually increase the brain drain. The purpose of EXODUS is to analyze the way the diffusion of short-term contracts affect the individual decision to leave the home country in search for better work opportunities. Specifically, EXODUS focuses on investigating the employment condition, behavioral and mobility choices of young individuals with a high level of education, since their decisions may significantly exacerbate the brain drain phenomenon.
We carried out research on the Italian labour market, by focusing on the regulations of each form of typical and atypical contracts, the associated benefits and the way each reform that has been implemented since the early 90s have affected each specific contract. We studied the literature on migration and analyzed the way the flows of migrants have changed over time. We develop a search and matching model to explain the possible links between the features of the labour markets and the individual migration decision. We calibrate and simulate the model according to the Italian features to match the migration flows within the country. We explored the existence of available datasets to investigate empirically the causal relationship between employment protection and mobility choices, both in terms of commuting and migration. Due to several issues encountered during the data analysis, we spent long time cleaning the data and preparing a coherent dataset, representative of the population and rich with information both at individual and at regional levels. We performed data mining and studied the determinants of individual mobility choices, commuting and migration, across Italian regions in the past twenty years. Specifically, we analyzed the effect of the reforms reducing employment protection associated with temporary contracts on both phenomena.
We provide updates on my research related to the EXODUS project at

Towards achieving this goal, in the midterm of the EXODUS project’s duration the following have been obtained:
• A new and unique dataset has been constructed merging information from several different sources, with detailed information at individual as well as at regional level.
• A new search and matching model has been developed, tailored to the issue of migration in economies where search frictions represent strong barriers to achieve labour market efficiency.
• Overall six scientific papers have appeared or are in preparation, based on the information collected and/or on the dataset we have constructed.
• A dedicates website has been built, which provides information on our research to the scientific community.
• Several presentations at conferences and workshops have been given and invited seminar talks have been held.
• The fellow has established several collaborations within IMT and beyond centered in the interests of migration and its relations with labour markets.
• The fellow leads a group of two research collaborators. She is responsible for the research direction and planning and for the team coordination. A number of students have been exposed to the topic of migration and they have focused their final projects on this subject.
• This grant has provided several opportunities to favor the integration of the fellow in Europe. It has provided valuable start-up funding to support staff and attend conferences.
In the literature there are only few studies on inter-regional labour mobility at individual level controlling for regional variables, the main reason being the lack of available data. However, these studies are extremely important given the associated policy implications. As explained by Borjas (2001) labour mobility is an important equilibrating mechanism in the labour market, with the potential of reducing disparities in regional labour market outcomes, such as unemployment and wages. Therefore, inter-regional labour mobility can bring to an efficient spatial allocation of labour and consequently to welfare gains, particularly in areas with marked differences in regional labour market performance, as is the case for many European countries.
The expected final result of the project is to provide –to our knowledge for the first time– a complete analysis of the determinants of labour mobility. As explained above, this is a crucial –albeit understudied– aspect of the research, particularly when emphasis is placed on the relation with the labour market and the strictness of the employment protection legislation. In addition, EXODUS led to the development of a novel theoretical framework, to study the ties between employment protection and migration. We expect the model to be widely used by other economists who are trying to better estimate the effects of short-term contracts and understand their consequences for individuals and the economy as a whole.

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