Abstract

The paper analyses labour demand at firm level, and its relationships with the turnover outlook, as correct understanding of firm behaviour is crucial to designing effective employment incentives. The descriptive analysis shows low elasticity, as micro-level estimates tend to underestimate total effects of demand shocks. We therefore use ordered logit models so as to analyse main firm characteristics and business strategies influencing the firm response to a 10% permanent output increase. The demand outlook, firm size, and plant capacity utilisation are the variables that, in addition to the activity sector, make the difference in the elasticity of labour. According to the estimated models, in the period after 2016, the year of the ad hoc module of the Business Surveys carried out by the Italian National Institute of Statistics (Istat), the activity sectors showing greater elasticity of labour are: information and communication, financial and insurance activities, professional, scientific and technical activities, and administrative and support service activities.