A Contributory System of Unemployment Insurance : The Italian Experience

There is extensive literature on the effects of a change in the Potential Benefit Duration of unemployment benefits. However, little is known about how this affects workers with unstable and fragmented careers. Using a large administrative dataset from Italy and a regression discontinuity design, I exploit a reform that links the duration of unemployment benefits to the number of weeks worked before the unemployment event making the change in duration different for workers with different histories. I find that the new contributory system makes workers spend 20 days less in unemployment and it increases the likelihood of getting a permanent contract by 15\%. Workers are also more likely to change employer and sector of occupation. There is no detectable effect on tenure and wages. This effect is mainly driven by workers on temporary contracts, working in the north of the country, and in firms with weak employment protection