Abstract
After two decades of labour market reforms at the margin, the great recession created political scope to reduce the employment protection still benefitting the workers on open-ended contracts. To support employment levels, these policies have generally been combined with generous employment subsidies. While the theoretical and empirical literature on the two interventions taken in isolation appear generally abundant, almost nothing is known when they come combined. Analogously, no evidence is available on their distributional effects. This paper aims to fill these two gaps by means of counterfactual models estimated on high-frequency employer-employee-linked Italian data. Taking advantage of the quasi-experimental conditions created by the reforms enforced in Italy in 2015, we fit a (non-linear) difference-in-differences strategy into a competing risks duration model. We find prompt sensitivity of small firms to the incentives, while the large ones waited until they were combined with lower firing costs. Small firms substitute temporary for permanent employment, while larger ones do not seem inclined to forego fixed-term contracts, possibly for a probationary period. The reforms have benefitted domestic workers over foreigners, prime-age and older individuals over the young, and those with higher human capital. No gender effects emerge. Small firms operating in non-innovative sectors carry the bulk of heterogeneity effects. Finally, analysis on duration of newly activated open-ended contracts reveals a transitory effect, as separations jumped once the subsidies came to an end.
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Data availability
The main datasets (i.e. CO and ASIA) generated during and/or analysed during the current study are not publicly available due the privacy rules currently governing the access to personal information maintained under the Italian Statistical System (SISTAN), neither they are available from the authors although on reasonable request. However, access to the data can be gained:
• By filing a request of access to CO data to the Regional Administration of Piedmont, namely to its statistical office. The contact person is Mr. Giovanni Montano (giovanni.montano@regione.piemonte.it)
• By applying to the National Statistical Office (https://www.istat.it/it/dati-analisi-e-prodotti/microdati) to gain access to ASIA
Once the interested persons have gained access to the data, we remain fully available to assist them in the use of CO and ASIA.
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Acknowledgements
This work is part of the project “Young in, old out: demography and labour policies”, funded by University of Torino and Compagnia di San Paolo. We thank the Regional Administration of Piedmont for access to the data, Michelangelo Filippi for data support, and Chiara Quaglia for valuable research assistance. We also thank Pierre Cahuc, Bernardo Fanfani, Patrick Puhani, Enrico Rettore and the participants to all the seminars, workshops and conferences where previous versions of this work were presented for helpful suggestions. Usual disclaimers apply. The authors also declare that no conflict of interest does exist.
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Ardito, C., Berton, F. & Pacelli, L. Combined and distributional effects of EPL reduction and hiring incentives: an assessment using the Italian “Jobs Act”. J Econ Inequal 21, 925–954 (2023). https://doi.org/10.1007/s10888-023-09571-z
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DOI: https://doi.org/10.1007/s10888-023-09571-z