Do alternative work arrangements substitute standard employment? Evidence from worker-level data

This study analyzes the impact of an alternative work arrangement (AWA) called “voucher” on earnings of atypical workers and on their alternative income sources using Italian administrative data. SpeciFcally, I investigate whether this form of very Qexible work substitutes income from more standard labor contracts and welfare transfers related to employment insurance (sick and parental leave and unemployment beneFts). I estimate cross-income elasticities using Fxed effects and difference-in-differences speciFcations that correct for sample selection of individuals in the labor market. Results show that vouchers increase overall labor income, but they also substitute earnings derived from other labor contracts. I do not Fnd relevant associations between vouchers and welfare transfers. The positive effect of vouchers on total income is smaller in speciFcations that correct for sample selection bias, and the substitution effect with other labor income sources is substantially larger. Overall, my Fndings show that AWAs tend to substitute standard employment, with small positive net effects on earnings, which are larger for intensive users of vouchers, and in geographic regions with a more sizable informal sector.