No. 1011 - The effects of a large place-based reduction of social security employers' contributions: the case of Decontribuzione Sud
The paper studies Decontribuzione Sud, a programme providing for a reduction in employers' social security contributions that lowered labour costs by 5.6 percent for firms operating in the South of Italy between 2020 and 2024. We analyse which firms benefited from the measure, the reasons behind lower-than-expected take-up, and the effects on employment, wages, and firms' economic outcomes.
The measure was used primarily by medium-sized firms. Large companies often exceeded the ceilings set by the State aid regime, while small firms may have benefited from other incentives or faced difficulties in demonstrating compliance with social security contribution obligations. The relief contributed to mitigating the potential effects of the pandemic on firms' financial conditions, increasing profitability, liquidity and revenues, especially for those with higher labour intensity. No effects were found, however, on employment, wages or investment.
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