Temporary workers educational mismatch and firm performance

The objective of this paper is to provide new evidence on the effect of temporary contracts on firm productivity through their impact on skill mismatch using a matched employer-employee dataset. To achieve this goal, we regress TFP on the fraction of educationally mismatched temporary workers and a set of additional controls in a dynamic panel model at firm-year level controlling for industry and time effects. We also take advantage of institutional labour market reforms occurred in Italy in 2001 and 2003 to study the changes in the mismatch among temporary workers which differ for their training content. We find that over-education has a positive effect on TFP while the opposite is true for under-education. When looking on different types of workers we find that while the effect of over-education on TFP does not change for short-term workers, among apprentices has a negative effect on productivity which overturn the positive trend. Finally under-education among short term contract has mitigating effect on productivity while among apprentices, its effect is negative.