Matching Efficiency and Labour Market Reform in Italy. A Macroeconometric Assessment

A matching theory approach is utilised to assess the impact on the Italian labour market of the 1997 legge Treu, which considerably eased the regulation of temporary work and favoured its growth in Italy. We re-parameterise the matching function as a Beveridge Curve and estimate it as a production frontier. We find huge differences in matching efficiency between the South and the rest of the country. The legge Treu appears to have reduced unemployment in the more developed regions of the country but did not greatly affect the matching efficiency of the regional labour markets.