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tax credit policy and firms' behaviour: the case of subsidy to open-end labour contract in italy

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  • cipollone piero

    ()
    (Bank of Italy , Economic research department)

  • Anita Guelfi

    ()
    (confindustria, research department)

Abstract

In the past decade fixed-term contracts have been widely used to ease the regulatory burden in several European labour markets. Because there is some concern that they might be a dead-end for many worker, policy makers have intervened to increase transitions from fixed-term to open-end contracts. The effects of these interventions have not been thoroughly studied. This paper is a contribution to fill the gap. We look at a recent Italian policy designed to foster hiring with open-end rather than with fixed-term contracts. Our results seem to indicate that most of the financial support was wasted because of the large dead-weight loss associated to the program. Firms used the subsidy primarily to hire under open-end contracts workers who would have been hired under such contracts regardless of the subsidy, albeit after a short transition into temporary employment

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 471.

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Date of creation: Mar 2003
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Handle: RePEc:bdi:wptemi:td_471_03

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Keywords: tax credit; open-end contracts; fixed-term contracts; evaluation;

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References

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  1. Maia Güell, 2001. "Fixed-Term Contracts and the Duration Distribution of Unemployment," CEP Discussion Papers dp0505, Centre for Economic Performance, LSE.
  2. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones or Dead Ends?," LABORatorio R. Revelli Working Papers Series 8, LABORatorio R. Revelli, Centre for Employment Studies.
  3. Bruno Contini & Lia Pacelli & Claudia Villosio, 1999. "Short employment spells in Italy, Germany and the UK: testing the 'port of entry' hypothesis," LSE Research Online Documents on Economics 20221, London School of Economics and Political Science, LSE Library.
  4. Andrea Brandolini & Piero Cipollone & Paolo Sestito, 2001. "Earnings Dispersion, Low Pay and Household Poverty in Italy, 1977-1998," Temi di discussione (Economic working papers) 427, Bank of Italy, Economic Research and International Relations Area.
  5. Catalina Amuedo-Dorantes, 2000. "Work transitions into and out of involuntary temporary employment in a segmented market: Evidence from Spain," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(2), pages 309-325, January.
  6. Olivier Blanchard & Augustin Landier, 2001. "The Perverse Effects of Partial Labor Market Reform: Fixed Duration Contracts in France," NBER Working Papers 8219, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed-term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
  2. Aparicio Fenoll, Ainhoa, 2011. "The Effect of Product Market Competition on Job Instability," IZA Discussion Papers 5669, Institute for the Study of Labor (IZA).
  3. Piero Cipollone & Corrado Di Maria & Anita Guelfi, 2005. "Hiring incentives and labour force participation in Italy," Temi di discussione (Economic working papers) 552, Bank of Italy, Economic Research and International Relations Area.
  4. J. Ignacio García-Pérez & Yolanda Rebollo, 2007. "The Use of Permanent Contracts Across Spanish Regions: Do Regional Wage Subsidies Work?," Working Papers 2007-08, FEDEA.
  5. Boeri, Tito & Brandolini, Andrea, 2005. "The Age of Discontent: Italian Households at the Beginning of the Decade," IZA Discussion Papers 1530, Institute for the Study of Labor (IZA).
  6. Piero, Casadio, 2003. "Wage formation in the Italian private sector after the 1992-93 income policy agreements," MPRA Paper 29396, University Library of Munich, Germany.
  7. Giorgio Gobbi & Roberta Zizza, 2007. "Does the underground economy hold back financial deepening? Evidence from the Italian credit market," Temi di discussione (Economic working papers) 646, Bank of Italy, Economic Research and International Relations Area.
  8. cipollone piero & Anita Guelfi, 2006. "The value of flexible contracts; evidence from an italian panel of industrial firms," Temi di discussione (Economic working papers) 583, Bank of Italy, Economic Research and International Relations Area.
  9. Schömann, Klaus & Siarov, Liuben & van den Heuvel, Nick, 2006. "Managing social risks through transitional labour markets," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2006-117, Social Science Research Center Berlin (WZB).
  10. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: A Honeymoon Effect?," Carlo Alberto Notebooks 37, Collegio Carlo Alberto.

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