Firm Restructuring and Worker Outcomes: Evidence from Branch Transfers in Italy”

Abstract:  

We study the labor market consequences of firm restructuring using branch transfers (cessioni di ramo d'azienda) recorded in Italian administrative data over 2005-2023. Under Italian law, when a firm transfers a business unit to another entity, affected workers follow the branch under the same contractual terms - creating a sharp, identifiable reallocation event that we can trace in employer-employee records linked to firm balance sheets. Using a matched event-study design, we examine outcomes for workers transferred to the receiving firm (leavers) and workers who remain at the origin firm (stayers). We find negative, persistent earnings losses for leavers, driven primarily by transitions to non-employment. Strikingly, stayers experience even larger losses despite remaining at the same employer - suggesting that restructuring erodes the value of ongoing employment relationships beyond what the direct reallocation of workers would imply. Effects are highly heterogeneous: transfers between unrelated firms resemble the "fissured workplace" pattern of excluding workers from rents, while within-group reorganizations are relatively benign, and there is substantial variation across industries. Leaver and stayer effects at the same event are positively correlated, consistent with restructuring operating as a joint shock. Our results reveal that the costs of firm restructuring extend well beyond the directly transferred workers.