Employment effects of the Italian Jobs Act: An ex-post impact evaluation

Abstract

In 2015 Italy adopted a new labor market policy, the so-called Jobs Act (JA) that is aimed at fostering employment and reducing costs in firing employees. JA granted a relevant hiring subsidy in the form of relief on social security contributions. JA included a new regulation that lowered firing costs and made them less uncertain. In this paper we investigated how the Jobs Act previsions affects employment. We estimate the impact of Jobs Act relief on social security contributions and the effect of new firing rules on employment using a large sample of Italian firms and by applying a two-step procedure: propensity score matching and Difference-in-Difference estimation. The main finding is a weak temporary increase of new hiring due to lower labor costs and labor dismissal deregulation. Actually, the outcomes of this model do not signal a strong effect of these measures both for the employment changes and for flexible workers changes. The employment changes seem to be benefited more from new dismission rules than from de-contribution incentives.