Do labour hoarding practices stimulate training investments? Evidence from the Italian Great Recession

Abstract

PurposeThis paper investigates the relationship between labour hoarding practices and training investments during severe economic downturns focusing on the case of Italy during the Great Recession.Design/methodology/approachData come from the 2010 Italian wave of Continuing Vocational Training Survey (CVTS). Econometric estimates plug a proxy of labour hoarding into the probability function that firms provide either off-the-job or on-the-job training. A bivariate selectivity probit model is also used for robustness sake.FindingsResults show that labour hoarding should not be considered as an enhancer of training investments when considered as a standing-alone practice in presence of severe and deep economic downturn. However, labour hoarding does not penalize off-the-job training investments if it occurs in an innovative firm or in a firm that perceive specific skill requirements in the workforce during the recessionary period.Originality/valueThe paper contributes to the debate on the role of labour hoarding during severe recessions by showing that it cannot be functional to re-oriented firms’ investments aimed at upskilling their workforce. It is only compatible with new training courses that accompany the workforce across a technological transition. Policy implications deals with the suitability of job retention schemes or state-financed furlough during recessions, as occurred during the coronavirus disease 2019 (COVID-19) pandemic.