Financial support to permanent jobs. The Italian case

In the past decade fixed-term contracts have been widely used to ease the regulatory burden in several European labour markets. Since there is some concern that they might be a dead-end for many workers, policy makers have intervened to increase transitions from fixedterm to open-end contracts. The effects of these interventions have not yet been thoroughly studied. This paper is a contribution to fill this gap. We look at a recent Italian policy designed to foster hiring with open-end rather than with fixed-term contracts. Our results seem to indicate that most of the financial support was wasted because of the large dead-weight loss associated with the program. There exists some weak evidence that better educated workers benefited from the introduction of the tax credit, especially in the South.