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A tale of comprehensive labor market reforms: evidence from the Italian jobs act

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  • Tito Boeri
  • Pietro Garibaldi

Abstract

The Italian Jobs Act introduced a subsidy for new hirings as well as a new open ended labor contract based on graded security, with severance payments increasing with tenure, while phasing out the compulsory reinstatement of workers in the case of unfair dismissals applied until March 2015. Simple models of job creation and destruction predict that hiring subsidies and lower _ring costs unambiguously increase hirings. Moreover, lower _ring costs associated with graded security should also increase layoffs. These effects need not to be uniform across the size distribution of firms, especially when firms of different size are treated differently by the policy changes as in the case of the Jobs Act. On the one hand, the hiring subsidy was proportional to wages, but had a cap, hence was more generous for small firms - typically paying lower wages than large firms - making them particularly responsive along the job creation margin. On the other hand, the reduction in _ring costs applied mainly to large firms concentrating on them the adjustment along the job destruction margin. To investigate empirically the effects of the Italian Jobs Act, we draw on a unique dataset covering the universe of private firms in Italy having at least once 10 to 20 employees in the two years prior to the reform of January 2015. We find evidence of a substantial increase in open ended hirings, and in the transformation of fixed-term into open ended contracts, in the aftermath of the Jobs Act. The effects of the Jobs Act on firings- conversely- are much smaller, and are concentrated on large _firms, while small _firms react more intensively- creating new open ended contracts - to the hiring subsidy.

Suggested Citation

  • Tito Boeri & Pietro Garibaldi, 2019. "A tale of comprehensive labor market reforms: evidence from the Italian jobs act," CEP Discussion Papers dp1613, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1613
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    1. Anche il Jobs act influenza le scelte di maternità
      by Maria De Paola, Roberto Nisticò e Vincenzo Scoppa in La Voce on 2020-06-02 09:03:44

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    4. Paolo Emilio Mistrulli & Tommaso Oliviero & Zeno Rotondi & Alberto Zazzaro, 2023. "Job Protection and Mortgage Conditions: Evidence from Italian Administrative Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 85(6), pages 1211-1237, December.
    5. di Porto, Edoardo & Tealdi, Cristina, 2022. "Heterogeneous Paths to Stability," IZA Discussion Papers 15246, Institute of Labor Economics (IZA).
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    7. De Paola, Maria & Nistico, Roberto & Scoppa, Vincenzo, 2020. "Fertility Decisions and Employment Protection: The Unintended Consequences of the Italian Jobs Act," IZA Discussion Papers 12991, Institute of Labor Economics (IZA).
    8. Giuseppe Grasso & Konstantinos Tatsiramos, 2023. "The Impact of Restricting Fixed-Term Contracts on Labor and Skill Demand," CESifo Working Paper Series 10693, CESifo.
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    10. Augusto Cerqua & Guido Pellegrini, 2020. "Labor mobility effects of a firm-level shock," Working Papers 1/20, Sapienza University of Rome, DISS.
    11. Fiaschi, Davide & Tealdi, Cristina, 2021. "A General Methodology to Measure Labour Market Dynamics," IZA Discussion Papers 14254, Institute of Labor Economics (IZA).
    12. Anh Tuan Bui & Thu Phuong Pham, 2021. "Financial and Labour Obstacles and Firm Employment: Evidence from Europe and Central Asia Firms," Sustainability, MDPI, vol. 13(15), pages 1-18, August.
    13. Belloc, Filippo & Burdin, Gabriel & Landini, Fabio, 2022. "Robots, Digitalization, and Worker Voice," GLO Discussion Paper Series 1038, Global Labor Organization (GLO).
    14. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    15. Elena Bastianelli & Daniele Vignoli, 2022. "The Gendered Relationship Between (Old and New Forms of) Employment Instability and Union Dissolution," Population Research and Policy Review, Springer;Southern Demographic Association (SDA), vol. 41(3), pages 1021-1048, June.
    16. Davide Fiaschi & Cristina Tealdi, 2024. "Let's roll back! The challenging task of regulating temporary contracts," Papers 2401.17971, arXiv.org.
    17. Traverso, Silvio & Vatiero, Massimiliano & Zaninotto, Enrico, 2024. "Automation and flexible labor contracts: Firm-level evidence from Italy," GLO Discussion Paper Series 1425, Global Labor Organization (GLO).
    18. Elena Bastianelli & Daniele Vignoli, 2021. "Instability of Employment Careers and Union Dissolution. A Complex Micro-level Relation," Econometrics Working Papers Archive 2021_04, Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti".
    19. Claudia Pigini & Stefano Staffolani, 2022. "Firing Costs and Job Loss: The Case of the Italian Jobs Act," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 8(1), pages 105-143, March.
    20. Pezone, Vincenzo, 2023. "The real effects of judicial enforcement," Other publications TiSEM 08176032-a171-4f23-8dac-e, Tilburg University, School of Economics and Management.
    21. Gianluca Cerruti & Gianluca Mazzarella & Mauro Migliavacca, 2023. "Employment protection legislation and household formation: evidence from Italy," Review of Economics of the Household, Springer, vol. 21(3), pages 913-939, September.
    22. Vincenzo Pezone, 2023. "The Real Effects of Judicial Enforcement," Review of Finance, European Finance Association, vol. 27(3), pages 889-933.
    23. Fiaschi, Davide & Tealdi, Cristina, 2022. "Scarring Effects of the COVID-19 Pandemic on the Italian Labour Market," IZA Discussion Papers 15102, Institute of Labor Economics (IZA).
    24. Ardito, Chiara & Berton, Fabio & Pacelli, Lia, 2019. "Combined and Distributional Effects of EPL Reduction and Hiring Incentives: An Assessment Using Non-Linear DiD," IZA Discussion Papers 12748, Institute of Labor Economics (IZA).
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    More about this item

    Keywords

    labor mobility; jobs act;

    JEL classification:

    • J10 - Labor and Demographic Economics - - Demographic Economics - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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