Benefit Transfers in Italy: An Empirical Study of Mobility Lists in the Milan Area

AuthorRaffaele Miniaci,Giorgio Brunello
Date01 August 1997
DOIhttp://doi.org/10.1111/1468-0084.00069
Published date01 August 1997
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 59, 3 (1997)
0305-9049
BENEFIT TRANSFERS IN ITALY: AN
EMPIRICAL STUDY OF MOBILITY LISTS IN
THE MILAN AREA
Giorgio Brunello and Raffaele Miniaci*
I. INTRODUCTION
The evaluation of labour market policies is important both to policy
design and to the understanding of individual behaviour and labour
market outcomes. It is common to classify these policies into passive and
active. Passive policies are devoted to income support of the unemployed.
Active policies, on the other hand, focus on job broking, training, direct
job creation and employment subsidies.1While the former have often
been considered as one of the causes of high and persistent unemploy-
ment in Europe,2the latter are widely regarded as a way of reducing
unemployment without increasing wage pressure and inflation.3
Labour market policies can include both passive and active elements. A
typical example is the benefit transfers scheme proposed by Snower
(1994) and implemented by the UK Workstart programme. According to
this scheme, the unemployed receive income support (the passive
element) and can voluntarily use these benefits as vouchers for employers
who hire them (the active element). An interesting example of benefit
transfers outside the UK is the institution of mobility lists, designed to
handle collective redundancies in the Italian labour market.4Enrolment
in these lists provides substantial income support to eligible recipients,
who can transfer part of their entitlement to the employers who hire
them.
In a nutshell, the system works as follows. Redundant employees are
enrolled into mobility lists, that are run by regional employment offices
(agenzie regionali). Enrolled workers who are eligible receive benefits that
*We are grateful to an anonymous referee, to Enrico Rettore, Guglielmo Weber and to
audience in Aarhus, Padua, Trento and Venice for comments and suggestions. The usual
disclaimer applies.
1See Calmfors and Lang (1995) and OECD (1990).
2See Layard, Nickell and Jackman (1991).
3See Jackman, Pissarides and Savvouri (1990).
4Another example is the Job Compact scheme, implemented in Australia.
329
© Blackwell Publishers Ltd, 1997. Published by Blackwell Publishers, 108 Cowley Road, Oxford
OX4 1JF, UK & 350 Main Street, Malden, MA 02148, USA.
range between 60 and 80 percent of previous salary for a period that
varies mainly according to age at dismissal. A firm that hires on a perma-
nent contract a worker from the pool is entitled both to a substantial
temporary reduction in social security contributions and to a bonus equal
to 50 percent of the benefits accruing to the worker for the remaining
period of entitlement. Ceteris paribus, the bonus is larger for older
workers, who are allowed to stay in the lists and draw benefits for a
longer period. Since these workers are also likely to experience longer
unemployment durations, benefits can be considered as implicitly targeted
at the long-term unemployed.
An important policy issue is whether allowing older workers to stay and
draw benefits longer in the lists increases their hazard rate out of the
unemployment pool. The answer to this question is not obvious. On the
one hand, better treatment in the list can increase the reservation wage of
older workers, especially if they have easy access to the illegal job market.
On the other hand, the relatively larger bonus carried by older workers
can increase the flow of job offers they receive, relative to younger
workers. As is often the case, the balance of these effects can only be
sorted out empirically. This is the purpose of the current paper, that uses
a newly available data-set to investigate whether allowing older workers
to draw benefits longer affects in a significant way their hazard from
unemployment.
Compared to the rest of Europe and the US, microeconomic impact
evaluations of Italian labour market policies are very few.5Exceptions are
Felli and Ichino (1988), who study the effect of marginal employment
subsidies on the re-employment probabilities of a fairly small sample of
workers enrolled in the special wage supplementation fund (CIGS),
Borzaga et al. (1994) and Caroleo et al. (1995), who also look at mobility
lists.6This paper has two key results. First, we find evidence that, condi-
tional on age effects, the average effect of treating older workers with an
additional year of benefits reduces their hazard from unemployment into
a permanent job. Second, we find that this effect is particularly significant
and large for older women in the sample. These findings suggest that, for
older workers and especially for older women, the impact of a longer
entitlement on the reservation wage dominates the impact of a potentially
higher benefit transfer, with negative implications for the hazard.
The material in the paper is organized as follows. Section II provides
some background on the institution of mobility lists. Section III presents
the data and Section IV discusses the empirical strategy and presents the
results. Conclusions follow.
5A recent OECD survey of empirical work in this area does not list any study from Italy.
See OECD (1994).
6One reason for the relative scarcity of empirical research is the lack of suitable data.
© Blackwell Publishers 1997
330 BULLETIN

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