Flexibility Policies and Re-employment Probabilities in Italy

We analyze the effects of Italian labor market reforms \u201cat the margin\u201d on the probability of exiting from non-employment and entering permanent and temporary contracts, using WHIP data for the period 1985\u20132004. We find that the reforms have strengthened the duration dependence parameter, meaning a stronger labor market gap in employment opportunities between the short- and long-term non-employed. We suggest that in a flexible labor market, long-term unemployment is used by firms as a screening device to detect less productive workers. We also find evidence of greater differences in employment opportunities according to gender, and of reduced differences between regional labor markets