Great Transformation: Recasting Regional Policy

This paper analyzes the role of the agglomeration of highly educated employers on firms’ utilization of fixed term contracts, an issue that the literature has not investigated so far. Based on the received literature, we argue that knowledge spillovers arising from the human capital of employers located in a given economic environment represent a potential factor affecting personnel policies by every firm operating in the same environment. Taking advantage of a unique firm-level dataset from Italy, our findings demonstrate that firms located where the agglomeration of university graduate employers is denser show a significantly lower propensity to hire on a temporary basis. This result is found to be sizeable for smaller businesses while it disappears for larger companies. Potential endogeneity issues concerning this spillover effect are coped with an IV approach. Separate estimates for the subsamples of family firms and market owned firms provide a further robustness check.