Abstract
In Italy, the share of temporary employment varies significantly across regions, with higher averages observed in the South. This paper examines the extent to which the North–South gap relates to different firms’ hiring strategies, or rather that it stems from the evolution and the duration of job contracts. Using a unique source of contract-level administrative data, we analyse entry conditions in the labour market and the evolution of temporary positions. Our results suggest that the greater use of fixed-term contracts in the South is not attributable to differences in firms’ hiring strategies. In fact, workers are initially hired on a temporary basis more frequently in the North. The geographical gap, instead, stems from the lower probability that these temporary positions are eventually converted into an open-ended contract. Furthermore, we observe regional variations in the duration of permanent jobs, with shorter durations in the South. There is evidence suggesting that the subsidies implemented in Italy in 2015-2016 to promote permanent employment had positive effects on contract duration.
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Notes
Source: LFS, Eurostat.
In the rest of the paper, we will refer to fixed-term and temporary jobs as synonyms.
The Labour Force Survey is conducted by Istat, the Italian Institute for Statistics, and provides detailed data on employment status and personal characteristics for a representative sample of Italian residents; for those employed, both firms characteristics and job specifics are available. We use data for the period 2004 (which corresponds to the release of the new LFS) to 2020.
We exclude agriculture and predominantly public sectors, as well as domestic workers, leaving us with 1.8 million observations.
The gap is computed between the average share of temporary workers in the Mezzogiorno (Abruzzo, Puglia, Basilicata, Calabria, Campania, and Molise) and the northern and central regions (Valle d’Aosta, Piedmont, Liguria, Lombardy, Emilia-Romagna, Veneto, Friuli-Venezia Giulia, Trentino-Alto Adige, Lazio, Marche, Tuscany, and Umbria).
In a case of a non-linear model, such as the probit used in this analysis, the computation of the effects of individual variables is not straightforward since a simple replacement method can lead to path-dependent results (see Ham et al. (1998) for an extensive discussion). The methodology proposed by Yun (2004), relying on a basic Taylor expansion, is free from this issue.
Data include both the expected end date and the actual one. June 2019 is the last date for which the microdata are available.
We exclude from the analysis the two-digit NACE codes for sectors from 01 to 03, 84 to 88 and 97 to 99.
The duration is computed as the difference between the end and starting date for terminated contracts, and as the difference between the transformation and starting date for converted ones.
Employment spells may be censored if the hiring date is close to the last date available in our database, which is 30 June 2019. In order to limit this bias, we only consider contracts activated before June 2018.
The duration of PCs is computed as the difference between the end and starting date for new open-ended contracts, and as the difference between the end and transformation date for converted ones.
Up to a maximum of 8.060 yearly for full-time jobs.
In 2017, the measure was restricted to firms operating in the South of Italy (the so-called Occupazione sud incentive). In 2018 and 2019, the Government introduced a new subsidy aimed at young workers in all regions.
In 2014, the main recipients of the subsidy were long-term unemployed subjects: the programme only targeted firms that hired with a permanent contract individuals that had been jobless for at least 24 months or who had been covered by the national short-time work compensation scheme (Ciani et al. 2019). Though applicable throughout Italy, the incentive was mainly used by firms located in the South of Italy, where the number of eligible individuals was higher and the benefit was more generous. In the South, the subsidy was equal to 100% of social security contributions for three years, while it was 50% in the rest of Italy.
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We would like to thank Antonio Accetturo, Domenico Depalo, Roberto Torrini and Eliana Viviano for their helpful comments. We are grateful to participants at the internal seminars at the Bank of Italy for their useful suggestions. The views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Italy.
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Modena, F., Camussi, S.A.M. & Colonna, F. Temporary Contracts: An Analysis of the North–South Gap in Italy. Ital Econ J (2024). https://doi.org/10.1007/s40797-023-00257-z
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DOI: https://doi.org/10.1007/s40797-023-00257-z