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Cui prodest? A firm‐level analysis of hiring credits

Year: 2025

Type: article

Abstract: ABSTRACT In the aftermath of the Great Recession, hiring credits have become popular worldwide. The empirical literature shows positive but moderate effects of such interventions on employment. However, an in‐depth analysis of the characteristics of the beneficiary firms and their wage‐setting policies is still lacking. By using a linked employer–employee dataset, this paper presents a firm‐level analysis of a three‐year employer‐borne payroll tax cut for permanent hirings introduced in Italy in 2015. After estimating firm and worker fixed effects through the standard AKM model, we show that the take‐up of hiring credits is significantly higher for firms that pay lower wages, are less productive, employ workers with lower mean abilities, and have a lower retention rate. This result is robust to several specifications and stratifications of the sample, and provides a further and different perspective from which to question the use of active labour market policies based on employer‐borne payroll tax cuts.

Source: Economica

DOI: 10.1111/ecca.12572

Authors: Edoardo Santoni, Fabrizio Patriarca, Margherita Scarlato

Institutions: University of Ferrara, University of Modena and Reggio Emilia, Roma Tre University

Language: English

Topic: Labor market dynamics and wage inequality

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $3,400