The complementarity between automation and flexible labour contracts: firm-level evidence from Italy

This study examines the association between firm-level investments in automation technologies and employment outcomes, drawing on a panel dataset of approximately 10,450 Italian firms. We focus on the proliferation of non-standard labour contracts introduced by labour market reforms in the 2000s, which facilitated external labour flexibility. Our findings reveal a positive relationship between automation investments and the adoption of these flexible labour arrangements. Guided by a conceptual framework, we interpret this result as evidence of complementarity between automation technologies – viewed as flexible capital – and non-standard contractual arrangements – viewed as flexible labour. This complementarity is essential for enhancing operational flexibility, a critical driver of firm performance in competitive market environments. From a policy perspective, our analysis highlights the importance of measures that protect labour without undermining the efficiency gains enabled by automation.