Welfare reforms and labour supply in Italy

This paper looks at welfare reforms in Italy and their effects on labour supply. I focus on social security reforms, which have taken place in the 1990s and on labour market reforms. Old age social security expenditure in Italy is high (14% of GDP) and the sys­tem has been very generous on early retirement possibilities: the reforms have tried to tackle these issues with mixed results. The labour market reforms have addressed the ri­gidity of the labour market by making it easier for firms to hire on a short-term basis. However the UI system is limited to open-ended contracts and coverage is also re­stricted, so that young workers employed in short-term contracts have very little protec­tion from the welfare state.

Keywords: social security system, unemployment insurance, labour supply
JEL-codes: H53; H55; I38; J08; J26; J65