Hiring incentives and labour force participation in Italy

Paper prepared for the ECB-CEPR workship "What explains the pattern of labour supply in Europe", Frankfurt, 23-24 June 2003A long-standing economic tradition maintains that labour supply reacts to market tightness; its sensitivity to job quality has received less attention. If firms hire workers with both temporary and open-ended contracts, does participation increase when more permanent jobs are available? We investigate this relationship within a policy evaluation framework; in particular, we examine how labour supply reacted in Italy to a recent subsidy in favour of open-ended contracts. This subsidy increased labour force participation by 1.4% in 2001 and 2.1% in 2002. This increase was concentrated on males aged 35-54, with a low or at most a secondary schooling level.Conference detailshttp://www.ecb.int/events/conferences/html/labour_supply.en.htm