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Changes in the Italian unemployment insurance scheme and estimation of their effects on unemployment duration and transition to a new job

Project researchers

The effect of different unemployment insurance (UI) schemes on subsequent labour market histories is still a debated topic. The main results in the literature show that higher replacement rates and longer eligibility periods take to longer unemployment spells even if it may end up in a better job match. Moreover, the hazard to employment sharply increases when approaching the end of the eligibility period. Nevertheless, these results are not homogeneous and depend on the characteristics of the labour market, the overall welfare and activation measures and the methods used for assessing the impact of UI. If compared to many other European countries, the Italian labour market has always been characterized by very low UI. The main purpose of the research project is to exploit some of the recent changes in the Italian legislation in order to estimate the effects of higher and/or longer UI on the length of unemployment spells, the probability of transition to a new job, and the "quality" of the new job.

As a preliminary analysis, we exploit an original database tracing the transitions in and out Ordinary Unemployment Benefit (OUB) and show that the measure is used as a benefit granted for episodes of frictional unemployment - that should be considered its proper use – just for half of the cases. The other half is absorbed by seasonal work, "permanently precarious" work in the public sector, and temporary layoffs. In the latter case, OUB is used as a substitute for the measure specifically targeted to temporary layoffs (the Cassa Integrazione Guadagni). Furthermore, it appears that a large share of individuals eligible for OUB opt for such competing measure, that is nearly equivalent in terms of benefit but not conditional on job search and availability for work - which are crucial requirements for OUB recipiency. Finally, with a micro-simulation we show how the documented (mis)uses of OUB imply a structural imbalance between contributions and benefits across different categories of workers. This evidence raises both equity and financial sustainability issues.

 Roberto Leombruni (University of Turin) and Adriano Paggiaro (University of Padua) are also involved in the project.

2009 to 2013