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Making the Italian Labor Market More Flexible: An Evaluation of the Treu Reform

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Dario Sciulli ()

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Abstract

The Treu Law introduced temporary contracts and extended the applicability of fixed-term contracts in order to increase the flexibility of the labour market and to reduce unemployment. The paper inquires whether the reform has affected the duration dependence related to the out-flow from non-employment, how previous atypical contract experiences affect the probability of finding a stable job and if the probability of flowing toward a permanent contract is higher moving from a non-working state rather than from an atypical job. Applying a Mixed Proportional Hazard (MPH) model with competing risk to a sub-sample drawn from the WHIP dataset, I estimate the hazard rate for the state transitions. My main findings predict an increase in negative duration dependence for non-working state out-flow, meaning an amplification of the short-term unemployed - long-term unemployed duality. It is a consequence of the larger use of atypical contracts, that would provide a screening instrument for the hiring choices of firms. Previous atypical job experiences play a negative effect on the probability of moving toward a stable job if the origin state is a non-working condition, while they have a positive role in the transition toward an atypical job. Besides, there is no evidences that the probability of finding a permanent contract is higher for workers who move from an atypical contract rather from a non-working state. Finally, a human capital accumulation effect is found to explain the transition toward a stable job. Policy recommendations include promotion of longer contracts, implementation of training programs and services to facilitate job-search.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we063408.

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Date of creation: Apr 2006
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Handle: RePEc:cte:werepe:we063408

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  2. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding Are Legal Limits? Transitions from Temporary to Permanent Work in Spain," IZA Discussion Papers 782, Institute for the Study of Labor (IZA). [Downloadable!]
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  3. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March. [Downloadable!] (restricted)
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  5. Martinez-Granado, Maite, 2002. "Self-Employment and Labour Market Transitions: A Multiple State Model," CEPR Discussion Papers 3661, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  6. Abbring, Jaap H & van den Berg, Gerard J, 2007. "The Unobserved Heterogeneity Distribution in Duration Analysis," CEPR Discussion Papers 6219, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Honore, Bo E, 1993. "Identification Results for Duration Models with Multiple Spells," Review of Economic Studies, Blackwell Publishing, vol. 60(1), pages 241-46, January. [Downloadable!] (restricted)
  8. Andrea Ichino & Fabrizia Mealli & Tommaso Nannicini, 2005. "Temporary Work Agencies in Italy: A Springboard Toward Permanent Employment?," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 64(1), pages 1-27, September. [Downloadable!]
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  11. 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, ILR School, Cornell University, vol. 53(2), pages 309-325, January.
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  14. Gagliarducci, Stefano, 2005. "The dynamics of repeated temporary jobs," Labour Economics, Elsevier, vol. 12(4), pages 429-448, August. [Downloadable!] (restricted)
  15. Zijl, Marloes & van den Berg, Gerard J. & Heyma, Arjan, 2004. "Stepping Stones for the Unemployed: The Effect of Temporary Jobs on the Duration until Regular Work," IZA Discussion Papers 1241, Institute for the Study of Labor (IZA). [Downloadable!]
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  16. Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-79, June. [Downloadable!] (restricted)
  17. Alba-Ramirez, Alfonso, 1999. "Explaining the Transitions Out of Unemployment in Spain: The Effect of Unemployment Insurance," Applied Economics, Taylor and Francis Journals, vol. 31(2), pages 183-93, February. [Downloadable!] (restricted)
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