Effects of Labour Market Flexibility in the Long Run: Evidence from the Italian Case (1977-2009)

The present paper studies whether labour market deregulation is correlated with employment creation in Italy and the decline of trade union power. Our hypothesis is that the correlation does not hold, and that flexible contracts facilitated the dichotomy between industry and tertiary, without causing it. To test it, we first apply principal component analysis, then regression. The hypothesis is almost always confirmed. Flexible contracts are not correlated with youth employment creation, whilst trade union decline is correlated with macroeconomic indicators different from flexible contracts. These interventions facilitated a process already underway, caused by a structural change in the production paradigm.