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

Author

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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

Suggested Citation

  • cipollone piero & Anita Guelfi, 2003. "tax credit policy and firms' behaviour: the case of subsidy to open-end labour contract in italy," Temi di discussione (Economic working papers) 471, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_471_03
    as

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    References listed on IDEAS

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    1. Alison L. Booth & Marco Francesconi & Jeff Frank, 2002. "Temporary Jobs: Stepping Stones Or Dead Ends?," Economic Journal, Royal Economic Society, vol. 112(480), pages 189-213, June.
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    4. 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.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Andrea Brandolini & Piero Casadio & Piero Cipollone & Marco Magnani & Alfonso Rosolia, 2007. "Employment Growth in Italy in the 1990s: Institutional Arrangements and Market Forces," AIEL Series in Labour Economics, in: Nicola Acocella & Riccardo Leoni (ed.), Social Pacts, Employment and Growth. A Reappraisal of Ezio Tarantelli’s Thought, edition 1, chapter 4, pages 31-68, AIEL - Associazione Italiana Economisti del Lavoro.
    2. Tito Boeri & Pietro Garibaldi, 2007. "Two Tier Reforms of Employment Protection: a Honeymoon Effect?," Economic Journal, Royal Economic Society, vol. 117(521), pages 357-385, June.
    3. Tito Boeri & Andrea Brandolini, 2004. "The Age of Discontent: Italian Households at the Beginning of the Decade," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(3-4), pages 449-487, December.
    4. Emanuele Ciani & Guido de Blasio, 2015. "Getting stable: an evaluation of the incentives for permanent contracts in Italy," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-29, December.
    5. 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.
    6. Giorgio Gobbi & Roberta Zizza, 2007. "Does the Underground Economy Hold Back Financial Deepening? Evidence from the Italian Credit Market," CEP Discussion Papers dp0789, Centre for Economic Performance, LSE.
    7. J. Ignacio García-Pérez & Yolanda F. Rebollo Sanz, 2009. "The use of permanent contracts across Spanish regions: Do regional wage subsidies work?," Investigaciones Economicas, Fundación SEPI, vol. 33(1), pages 97-130, January.
    8. Piero Cipollone & Corrado Di Maria & Anita Guelfi, 2004. "Hiring Incentives and Labour Force Participation in Italy," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(2), pages 161-203, November.
    9. Andrea Caggese & Vicente Cuñat, 2008. "Financing Constraints and Fixed‐term Employment Contracts," Economic Journal, Royal Economic Society, vol. 118(533), pages 2013-2046, November.
    10. Paolo Sestito & Eliana Viviano, 2016. "Hiring incentives and/or firing cost reduction? Evaluating the impact of the 2015 policies on the Italian labour market," Questioni di Economia e Finanza (Occasional Papers) 325, Bank of Italy, Economic Research and International Relations Area.
    11. Aparicio Fenoll, Ainoa, 2011. "The Effect of Product Market Competition on Job Instability," IZA Discussion Papers 5669, Institute of Labor Economics (IZA).
    12. 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.
    13. 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, WZB Berlin Social Science Center.

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    More about this item

    Keywords

    tax credit; open-end contracts; fixed-term contracts; evaluation;
    All these keywords.

    JEL classification:

    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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