The effects of labour market deregulation on individuals transitions between labour market states: the case of Italian reforms

The effects of temporary job experiences on short-term labour market outcomes in Italy

A partial equilibrium impact evaluation approach has been typically used to address the issue of the effects of temporary job experiences on short-term labour market outcomes. Though such approach disregards the general equilibrium effects of the extension of temporary arrangements on the functioning of the labour market, we will use it as a sort of “first step” analysis. The evaluation exercise makes use of short panels obtained by matching data from subsequent waves of the Italian Labour Force Survey (ILFS). We  identify the causal effect of experiencing a spell of temporary employment vs. a spell of unemployment on the short term labour market outcomes. In particular, we focus on the following outcomes: employment (irrespectively of whether it is temporal or permanent), permanent employment, “satisfactory employment”. We improve on previous  research in this field design by 1) using larger samples  allowing to explore the variability of the causal effect across workers, 2) developing a test to check whether the “treatment” and the “comparison” groups are in fact comparable.

Changes in work histories of different Italian cohorts of new labour market entrants at the national and local level (1993-2005)

This evaluation exercise explores the work histories of different cohorts of new labour market entrants over the three years after their entrance. It is related to the previous evaluation exercise on the short-term effects of temporary contracts described above but tackling the issue from a different and wider perspective.  Two major reforms increasing the flexibility in the Italian labour market (the so-called “Pacchetto Treu” adopted in 1997 and the extension of fixed-term contracts adopted in 2001) are exploited as a source of exogenous variation. Labour market transitions of a cohort of new entrants unaffected by the reforms are then compared to those experienced by  new entrants affected by  the reforms. However there is a price to pay for having expanded the target of the evaluation: the before-after design of the evaluation  carries the risk of distorting the real causal effects of the reform, confounding them with changes that would have occurred anyway, even in the absence of reform. The analysis was implemented using the databases ILFI (Longitudinal Survey on Italian Households) between 1997 and 2005 and considered two cohorts employed in the secondary and tertiary sectors. The relevant cohorts are defined with reference to the year in which they got their first job (i) from 1993 to 1995 and (ii) from 2001 to 2003, thus immediately before and immediately after the labor market reforms. In order to capture the effects of these reforms, as well as a detailed description of the transitions in the labor market for those two cohorts, two types of analysis were carry out: 1) a before-after evaluation design, 2) dynamic discrete response models which allow to control for observable and (time-invariant) unobservable heterogeneity across individuals as well as local labour market conditions.

Date: 2008 to 2010


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