Revisiting the Effects of Enhanced Flexibility on the Italian Labour Market

In this paper, we assess the effects of the Italian labour market reforms which began in 2001 and which led to widespread deployment of temporary work contracts. Using a hitherto unexploited administrative dataset of work histories for the period 2003-2010, we estimate transition probabilities in the states of non-employment and employment and find a small positive effect on job creation, imputed to the reforms. Estimates also indicate a large increase in transitions to temporary contracts, which offset the reduction in permanent employment flows, although transition probabilities for men and women explain little heterogeneity. While we do find a substitution effect of the reforms on the transition between temporary and permanent contracts, the increased probability of being employed in temporary jobs mostly involved young people and workers in the depressed areas of the south of Italy.