Labour market transition in Italy: an empirical investigation

In this paper I study the effects of the introduction of Treu package on the hazard rate of moving from a temporary job to a stable work in Italy. In order to enhance the flexibility of labour market and to stress the capabilities to create job, a progressive liberalization of flexible contracts has been adopted in Italy during the ‘90s, widening their scope and easing their adoption. The empirical exercise is carried out using an administrative dataset, Clap, extracted by the social security archives for the years 1992-2002. I apply a parametric and semi-parametric continuous time duration model to investigate whether the recent reform has changed the pattern of duration dependence in temporary employment duration. The main findings emphasize how the Treu package has substantially reduced the positive duration dependence in the hazard rate of moving from temporary to permanent employment. This result is robust to different specifications adopted for the baseline hazard. However, an even stronger conclusion concerns the temporary work agency (TWA) employment which exhibits a negative duration dependence in the post-reform period, probably indicating a negative relation between contract duration and the probability to moving into permanent employment for this contractual type. Finally I find large differences in terms of individual and job-related characteristics.