Job Protection and Mortgage Conditions: Evidence from Italian Administrative Data*
| Published date | 01 December 2023 |
| Author | Paolo Emilio Mistrulli,Tommaso Oliviero,Zeno Rotondi,Alberto Zazzaro |
| Date | 01 December 2023 |
| DOI | http://doi.org/10.1111/obes.12558 |
OXFORD BULLETIN OF ECONOMICS AND STATISTICS, 85, 6 (2023) 0305-9049
doi: 10.1111/obes.12558
Job Protection and Mortgage Conditions: Evidence
from Italian Administrative Data*
PAOLO EMILIO MISTRULLI,† TOMMASO OLIVIERO,‡,§ ZENO ROTONDI¶
and ALBERTO ZAZZARO‡,§
†Bank of Italy, Rome, Italy(e-mail: paoloemilio.mistrulli@bancaditalia.it)
‡University of Naples Federico II and CSEF, Napoli, Italy(e-mail: tommaso.oliviero@unina.it)
§MOFIR, Ancona, Italy(e-mail: zeno.rotondi@unicredit.eu)
¶Unicredit, Milan, Italy(e-mail: alberto.zazzaro@unina.it)
Abstract
This paper combines administrative data from the Italian social security administration
and proprietary data from a major Italian commercial bank to analyse the impact of job
protection legislation on mortgage conditions. An exogenous change in the degree of job
protection against individual dismissals of workers with open-ended contracts is identified
by exploiting the labour market reform of 2015, the ‘Jobs Act’, which weakened the
employment protection of new hires at medium-sized and large private firms. We find
that the lessening of job security led to lower mortgage amounts and a fall in leveraging
capacity, as measured by the loan-to-value ratio. The impact of job insecurity is mitigated
by the presence of co-mortgagors; it is aggravated for young and low-income mortgagors.
I. Introduction
In the last few decades, labour markets in many European countries have undergone major
legislative reform (Boeri, 2011; Turrini et al.,2014; Eichhorst, Marx, and Wehner, 2017).
A common feature has been transition towards greater flexibility in employment contracts
and weaker protection of insiders against individual dismissals, intended to stimulate
demand over the business cycle and favour the employment of young outsiders, but with
greater job insecurity. Italy is no exception in this regard.1
JEL Classification numbers: G21, J41, R21.
*We thank Maia Guell (the editor) and two anonymous reviewers for their suggestions and comments. We also
thank Kostantinos Balats, Alina K. Bartscher, Tito Boeri, Valentina Michelangeli, Roberto Nistic´
o, Lorenzo
Pandolfi, Francesco Vercelli and seminar participants at the Essex Business School 2022, the Bank of Italy
workshop 2020, the SIE Annual Conference 2020, the EEA Meeting 2020 and the VisitInps Web Conference
2020 for helpful comments. This project was developed as part of the VistInps Research Fellowship (2nd edition)
awarded to Tommaso Oliviero, who expresses his most sincere gratitude to Edoardo Di Porto and the staff of the
VisitInps programme for their support during his time as visiting fellow. The opinions expressed in this paper are
those of the authors alone and do not necessarily reflect those of the Bank of Italy or Unicredit.
Open Access Funding provided by Universit`
adegli Studi di Napoli Federico II within the CRUI-CARE Agreement.
1See Schindler (2009). and Berton, Richiardi, and Sacchi (2012). for a review of the labour market reforms of the
1990s and early 2000s from a comparative perspective, and Pinelli (2017). for a review of more recent events.
1211
©2023 The Authors. Oxford Bulletin of Economics and Statistics published by Oxford University and John Wiley & Sons Ltd.
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
1212 Bulletin
While the impact of the reforms on aggregate unemployment and labour market
outcomes has been analysed extensively,2the possible effects on other aspects of workers’
economic life and well-being remain relatively unexplored, even though clearly the
broader effects of job insecurity, outside the labour market, are of the utmost importance
to comprehensive assessment of these flexibility measures.
This paper focuses on one specific non-labour effect of labour market reforms:
whether and how much the degree of employment protection (job security) affects the
terms for access to the mortgage market for workers, as gauged by loan-to-value ratio
(LTV), mortgage amount and contractual interest rate scheme, that is, either fixed-rate or
adjustable-rate mortgages (FRM or ARM).
We build a granular dataset that combines proprietary data on mortgages from a major
Italian commercial bank and administrative data on mortgagors’ employment position
from the Italian National Institute for Social Security (Istituto Nazionale di Previdenza
Sociale, INPS). We use an exogenous change in employment protection for new employees
in medium-sized and large private enterprises introduced in 2015 by the labour market
reform known as the ‘Jobs Act’ (Law 183/2014) to test for the causal effect of job security
or insecurity on the mortgage market.
Italy constitutes a very interesting case study for two main reasons. First, the Italian
labour market has been historically characterized by a high degree of employment
protection and firing restrictions, especially for employees on permanent contracts and
for firms larger than 15 employees (Sestito, 2002; Schivardi and Torrini, 2008). Second,
young Italians achieve residential independence and become homeowners rather late in
life compared to their counterparts in the rest of Europe, and make less use of mortgage
loans (Chiuri and Jappelli, 2003). In this context, the new dismissal regime introduced
by the Jobs Act for permanent workers hired after 7 March 2015 represents an important
discontinuity in employment protection legislation (EPL), which allows investigation of
how the degree of job security affects workers’ access to mortgage loans. Empirically, we
use a difference-in-differences approach, comparing initial mortgage conditions for newly
hired workers against other mortgagors in the periods before and after 7 March 2015, but
only for workers in companies above the 15-employee threshold.
Our primary, preferred estimation refers to the restricted sample of one-person mort-
gages for which the conditions are exactly matched with the mortgagor’s employment
position. We show that controlling for salary, age and other observable characteristics, ini-
tial mortgage conditions do not differ systematically between newly hired and previously
hired mortgagors in the pre-Jobs-Act period, but that a difference does emerge after 7
March 2015, when the Act went into effect. Specifically, the loans to workers hired under
the new, weaker dismissal rules are marked by significantly smaller amounts and lower
LTV ratios, while the type of mortgage (FRM or ARM) is unaffected. Extending the sample
to mortgages with two mortgagors shows that the effect of the job insecurity induced by the
Jobs Act is mitigated by the presence of a co-mortgagor. We interpret this as evidence that
within-contract insurance among co-borrowers compensates for the greater income uncer-
tainty due to the weakened job protection. Finally, exploiting cross-sectional heterogeneity
2See Boeri and Jimeno (2005). for a theoretical approach and a discussion of the empirical evidence in OECD
economies.
©2023 The Authors. Oxford Bulletin of Economics and Statistics published by Oxford University and John Wiley & Sons Ltd.
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting