The paper provides evidence of the effectiveness of hiring subsidies that target the long-term unemployed, analysing a generous policy, particularly as regards the South, that was in force until the end of 2014 in Italy (Law 407/1990). Unlike others of its kind, this policy was particularly ambitious as it encouraged only permanent employment, while still benefiting from strong employment protection legislation.
We find that the relative probability of the long-term unemployed finding a permanent job in the southern regions dropped after the program terminated. Moreover, there is no evidence that the policy led to a change in wages. A cost-benefit analysis shows that the policy was globally in surplus.
Forthcoming in: Italian Economic Journal / Rivista italiana degli economisti.
