ПРИКЛАДНАЯ ЭКОНОМЕТРИКА № 1 (25) 2012 L. Carbonari1 Quasi-fixed inputs in the Italian manufacturing: The case of the pharmaceutical industry The aim of this paper is to study the demand for inputs in the Italian manufacturing, using firmlevel data on pharmaceutical industry. <...> The Italian pharmaceutical industry is characterized by the existence of longterm labor contracts, and this fact suggests to consider labor as quasifixed input. <...> In order to characterize firms' behavior we base our analysis on the restricted Generalized Leontief cost function. <...> The choice of this flexible functional form is due to its ability to capture the input substitution patterns in presence of more than one quasifixed input. <...> Therefore demand and substitu tion elasticities are estimated with respect to two different theoretical models: the first, QFI (1), with capital as quasifixed input and the second, QFI (2), with two quasifixed inputs, capital and labor. <...> The choice among the two alternative specifications is based on an elasticity comparison criterion, since the two models are not nested. <...> The results suggest a rigid productive structure during the period under observation. <...> Our results confirm the a priori on the labor market rigidity and point out the high heterogeneity between the firms, even controlling for size and nationality. <...> Introduction I n recent times, most surveys have underlined the Italian transition towards a more flexible labor market, e. g. (OECD, 2004, 2005). <...> Starting from early 90’s, a series of legal reforms has been introduced to raise labor market efficiency and to reduce the unions’ bargaining power2. <...> From an economic standpoint, such a growing flexibility in hiring could offer a further argument to model labor as a variable input. <...> Nevertheless, especially in the manufacturing, available data suggest that labor demand, at least in the short-run, is irresponsive to the change 1 I am very grateful to Bristol-Myers Squibb for the research grant that made this research possible. <...> I am deeply indebted to Vincenzo Atella for his patience in reading several versions of this paper and for providing the computer code. <...> Finally, in 2003, the so-called Biagi Law has given the variety of atypical labor contracts a common framework (Russo, Veredas, 2000). 51 Производство L.Carbonari ПРИКЛАДНАЯ ЭКОНОМЕТРИКА № 1 (25) 2012 in the production scale <...>