The Treu Reform and Contractual Mobility in Italy. A Comparison Between Labour-Market Entry Cohorts

The 1997 Treu reform introduced more flexibility in the Italian labour market by allowing free hiring of individuals on a temporary basis. We evaluate the short to medium effects of the reform on the labour market careers of new entrants. To assess whether the labour market reform has had any impact, the labour market outcomes of those cohorts entering just before the reform (1993-1995: control group) are compared to the outcomes of those cohorts entering immediately after its implementation (1999-2001: treatment group). The analyses are based on ILFI data (Italian Household Panel Study). To improve the comparability, the treatment and control groups have been matched on a set of individual observable characteristics relevant to individuals‟ labour market outcomes as well as on some observable local labour market characteristics. Findings show that while the reform had a major positive impact on the probability of being hired on a temporary basis at the first employment spell, the proportion of individuals attaining a stable occupation three years after their entrance into the labour market is only slightly lower after the reform than before it. On the other hand, the reform had a negative effect on the probability of both entering unemployment and leaving the labour force, and on the probability of experiencing an employment spell in the ‘black economy‟.