IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp1613.html
   My bibliography  Save this paper

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://cep.lse.ac.uk/pubs/download/dp1613.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Behaghel, Luc & Crépon, Bruno & Sédillot, Béatrice, 2008. "The perverse effects of partial employment protection reform: The case of French older workers," Journal of Public Economics, Elsevier, vol. 92(3-4), pages 696-721, April.
    2. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    4. Boeri, Tito & Jimeno, Juan F., 2005. "The effects of employment protection: Learning from variable enforcement," European Economic Review, Elsevier, vol. 49(8), pages 2057-2077, November.
    5. Valeria Cirillo & Marta Fana & Dario Guarascio, 2017. "Labour market reforms in Italy: evaluating the effects of the Jobs Act," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(2), pages 211-232, August.
    6. Riphahn, Regina T., 2004. "Employment protection and effort among German employees," Economics Letters, Elsevier, vol. 85(3), pages 353-357, December.
    7. repec:eee:labchp:v:3:y:1999:i:pb:p:2165-2214 is not listed on IDEAS
    8. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
    9. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    10. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214, Elsevier.
    11. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(2), pages 533-572, May.
    12. Hijzen, Alexander & Mondauto, Leopoldo & Scarpetta, Stefano, 2013. "The Perverse Effects of Job-Security Provisions on Job Security in Italy: Results from a Regression Discontinuity Design," IZA Discussion Papers 7594, Institute of Labor Economics (IZA).
    13. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
    14. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
    15. Kugler, Adriana & Pica, Giovanni, 2008. "Effects of employment protection on worker and job flows: Evidence from the 1990 Italian reform," Labour Economics, Elsevier, vol. 15(1), pages 78-95, February.
    16. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2008. "Two-tier Employment Protection Reforms: The Spanish Experience," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(04), pages 49-56, December.
    17. Juan J. Dolado & Etienne Lalé & Nawid Siassi, 2021. "From dual to unified employment protection: Transition and steady state," Quantitative Economics, Econometric Society, vol. 12(2), pages 547-585, May.
    18. 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.
    19. Garibaldi, Pietro & Pacelli, Lia, 2008. "Do larger severance payments increase individual job duration?," Labour Economics, Elsevier, vol. 15(2), pages 215-245, April.
    20. Pietro Garibaldi & Lia Pacelli & Andrea Borgarello, 2004. "Employment Protection Legislation and the Size of Firms," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 63(1), pages 33-68, April.
    21. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    22. Samuel Bentolila & Juan Jose Dolado & Juan F. Jimeno, 2008. "Two-tier Employment Protection Reforms: The Spanish Experience," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 6(4), pages 49-56, December.
    23. Fabio Berton & Pietro Garibaldi, 2012. "Workers and Firms Sorting into Temporary Jobs," Economic Journal, Royal Economic Society, vol. 122(562), pages 125-154, August.
    24. Andrea Ichino & Regina T. Riphahn, 2005. "The Effect of Employment Protection on Worker Effort: Absenteeism During and After Probation," Journal of the European Economic Association, MIT Press, vol. 3(1), pages 120-143, March.
    25. Paolo Sestito & Eliana Viviano, 2018. "Firing costs and firm hiring: evidence from an Italian reform," Economic Policy, CEPR;CES;MSH, vol. 33(93), pages 101-130.
    26. Schivardi, Fabiano & Torrini, Roberto, 2008. "Identifying the effects of firing restrictions through size-contingent differences in regulation," Labour Economics, Elsevier, vol. 15(3), pages 482-511, June.
    27. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    28. Pierre Cahuc & Olivier Charlot & Franck Malherbet, 2016. "Explaining The Spread Of Temporary Jobs And Its Impact On Labor Turnover," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57, pages 533-572, May.
    29. Fraisse, H. & Kramarz, F. & Prost, C., 2009. "Labor Court Inputs, Judicial Cases Outcomes and Labor Flows: Identifying Real EPL," Working papers 256, Banque de France.
    30. Pietro Garibaldi & Giovanni L. Violante, 2005. "The Employment Effects of Severance Payments with Wage Rigidities," Economic Journal, Royal Economic Society, vol. 115(506), pages 799-832, October.
    31. Boeri, Tito, 1999. "Enforcement of employment security regulations, on-the-job search and unemployment duration," European Economic Review, Elsevier, vol. 43(1), pages 65-89, January.
    32. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142, April.
    33. Boeri, Tito, 2011. "Institutional Reforms and Dualism in European Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 13, pages 1173-1236, Elsevier.
    34. Valeria Cirillo & Dario Guarascio, 2015. "Jobs and Competitiveness in a Polarised Europe," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 50(3), pages 156-160, May.
    35. Ioana Marinescu, 2009. "Job Security Legislation and Job Duration: Evidence from the United Kingdom," Journal of Labor Economics, University of Chicago Press, vol. 27(3), pages 465-486, July.
    36. repec:ces:ifodic:v:6:y:2008:i:4:p:14567215 is not listed on IDEAS
    37. Samuel Bentolila & Pierre Cahuc & Juan J. Dolado & Thomas Le Barbanchon, 2012. "Two‐Tier Labour Markets in the Great Recession: France Versus Spain-super-," Economic Journal, Royal Economic Society, vol. 122(562), pages 155-187, August.
    38. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-1024, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    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

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maria De Paola & Roberto Nisticò & Vincenzo Scoppa, 2020. "Fertility Decisions And Employment Protection: The Unintended Consequences Of The Italian Jobs Act," Working Papers 202003, Università della Calabria, Dipartimento di Economia, Statistica e Finanza "Giovanni Anania" - DESF.
    2. Augusto Cerqua & Guido Pellegrini, 2020. "Labor mobility effects of a firm-level shock," Working Papers 1/20, Sapienza University of Rome, DISS.
    3. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-provided Training: Quasi-experimental Evidence from a Labour Market Reform," GLO Discussion Paper Series 368, Global Labor Organization (GLO).
    4. Fiaschi, Davide & Tealdi, Cristina, 2021. "A General Methodology to Measure Labour Market Dynamics," IZA Discussion Papers 14254, Institute of Labor Economics (IZA).
    5. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    6. Anh Tuan Bui & Thu Phuong Pham, 2021. "Financial and Labour Obstacles and Firm Employment: Evidence from Europe and Central Asia Firms," Sustainability, MDPI, Open Access Journal, vol. 13(15), pages 1-18, August.
    7. Claudia Pigini & Stefano Staffolani, 2019. "Firing Costs And Job Loss: The Case Of The Italian Jobs Act," Working Papers 443, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2019. "Dual Labour Markets Revisited," IZA Discussion Papers 12126, Institute of Labor Economics (IZA).
    2. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2017. "Inside severance pay," Journal of Public Economics, Elsevier, vol. 145(C), pages 211-225.
    3. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2020. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," Development Working Papers 463, Centro Studi Luca d'Agliano, University of Milano, revised 27 Apr 2020.
    4. Per Skedinger, 2010. "Employment Protection Legislation," Books, Edward Elgar Publishing, number 13686, September.
    5. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142, April.
    6. Andrea Bassanini & Luca Nunziata & Danielle Venn, 2009. "Job protection legislation and productivity growth in OECD countries [Appropriate growth policy: a unifying framework]," Economic Policy, CEPR;CES;MSH, vol. 24(58), pages 349-402.
    7. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2021. "Employment protection and firm-provided training in dual labour markets," Labour Economics, Elsevier, vol. 69(C).
    8. John Martin & Stefano Scarpetta, 2012. "Setting It Right: Employment Protection, Labour Reallocation and Productivity," De Economist, Springer, vol. 160(2), pages 89-116, June.
    9. Bassanini, Andrea & Garnero, Andrea, 2013. "Dismissal protection and worker flows in OECD countries: Evidence from cross-country/cross-industry data," Labour Economics, Elsevier, vol. 21(C), pages 25-41.
    10. Federico Cingano & Marco Leonardi & Julián Messina & Giovanni Pica, 2016. "Employment Protection Legislation, Capital Investment and Access to Credit: Evidence from Italy," Economic Journal, Royal Economic Society, vol. 126(595), pages 1798-1822, September.
    11. Pedro S. Martins, 2009. "Dismissals for Cause: The Difference That Just Eight Paragraphs Can Make," Journal of Labor Economics, University of Chicago Press, vol. 27(2), pages 257-279, April.
    12. Andrea Vindigni & Simone Scotti & Cristina Tealdi, 2015. "Uncertainty and the Politics of Employment Protection," Journal of Labor Economics, University of Chicago Press, vol. 33(1), pages 209-267.
    13. O’Higgins Niall & Pica Giovanni, 2020. "Complementarities between Labour Market Institutions and their Causal Impact on Youth Labour Market Outcomes," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(3), pages 1-37, July.
    14. Bratti, Massimiliano & Conti, Maurizio & Sulis, Giovanni, 2019. "Employment Protection and Firm-Provided Training: Quasi-Experimental Evidence from a Labour Market Reform," IZA Discussion Papers 12773, Institute of Labor Economics (IZA).
    15. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R, 2014. "Severance Pay," CEPR Discussion Papers 10182, C.E.P.R. Discussion Papers.
    16. Marco Leonardi & Giovanni Pica, 2013. "Who Pays for it? The Heterogeneous Wage Effects of Employment Protection Legislation," Economic Journal, Royal Economic Society, vol. 123(12), pages 1236-1278, December.
    17. Laeven, Luc & McAdam, Peter & Popov, Alexander, 2018. "Credit shocks, employment protection, and growth: firm-level evidence from Spain," Working Paper Series 2166, European Central Bank.
    18. Nadav Ben Zeev & Tomer Ifergane, . "Firing Restrictions and Economic Resilience: Protect and Survive?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    19. Parsons, Donald O., 2011. "Mandated Severance Pay and Firing Cost Distortions: A Critical Review of the Evidence," IZA Discussion Papers 5776, Institute of Labor Economics (IZA).
    20. Bjuggren, Carl Magnus, 2018. "Employment protection and labor productivity," Journal of Public Economics, Elsevier, vol. 157(C), pages 138-157.

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cep:cepdps:dp1613. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (email available below). General contact details of provider: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.