Hiring incentives and/or firing cost reduction? Evaluating the impact of the 2015 policies on the Italian labour market

Paolo Sestito and Eliana Viviano

No 325, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: In 2015 Italy adopted two different policies aimed at reducing labour market dualism and fostering employment: a generous permanent hiring subsidy and new regulations lowering firing costs and making them less uncertain. Using microdata for Veneto and exploiting some differences in the design of the policies, we evaluate the impact of each measure. Both contributed to double the monthly rate of conversion of fixed-term jobs into permanent positions. Moreover, around 40 per cent of new total gross hires with permanent job contracts occurred because of the incentives, whereas 5 per cent can be attributed to the new firing regulations . The new firing rules also made firms less reluctant to offer permanent job positions to yet untested workers. The possibility of benefitting from the incentives in case of a conversion also boosted temporary hiring, as it allowed firms to test for the quality of a job match.

Keywords: job creation; firing costs; hiring incentives; labour market reforms (search for similar items in EconPapers)
JEL-codes: J21 J6 (search for similar items in EconPapers)
Date: 2016-03
New Economics Papers: this item is included in nep-cta, nep-eec and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (26)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_325_16

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