Fondazione GRINS
Growing Resilient,
Inclusive and Sustainable
Galleria Ugo Bassi 1, 40121, Bologna, IT
C.F/P.IVA 91451720378
Finanziato dal Piano Nazionale di Ripresa e Resilienza (PNRR), Missione 4 (Infrastruttura e ricerca), Componente 2 (Dalla Ricerca all’Impresa), Investimento 1.3 (Partnership Estese), Tematica 9 (Sostenibilità economica e finanziaria di sistemi e territori).
Open Access
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We use the 2015 Italian Jobs Act as a natural experiment to study how reducing employment protection affects workers’ perceived job insecurity and actual job loss, search behaviour, and mobility. The reform eliminated reinstatement rights for unfair dismissals and introduced tenure-based severance pay, applying exclusively to new hires in large firms. Using Labour Force Survey data and matched employer–employee records, we implement a difference-in-differences
design combined with a sharp severance pay discontinuity at two years of tenure. We find that low-tenure workers hired under the new regime are 17% more likely to fear job loss. Consistent with these perceptions, their probability of being laid off increases by 2%. In response, they increase on-the-job search (+21%) and job-to-job mobility (+22–28%), particularly from low-paying sectors, where moves lead to higher wages. In high-paying sectors, workers instead raise effort (+3–5% days worked). All these effects disappear when severance pay increases by 50% after two years of tenure. Our findings highlight a central policy trade-off: while lower firing costs at low tenure levels foster mobility and labour market efficiency, they also increase job insecurity, calling for tenure-targeted unemployment insurance.
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AKNOWLEDGEMENTS
This study was funded by the European Union - NextGenerationEU, in the framework of the GRINS - Growing Resilient, INclusive and Sustainable project (GRINS PE00000018). The views and opinions expressed are solely those of the authors and do not necessarily reflect those of the European Union, nor can the European Union be held responsible for them.
∗Corresponding author: Roberto Nisticò: University of Naples Federico II, Department of Economics and Statistics, Via Cintia Monte S. Angelo, 80126, Napoli, Italy. Email: roberto.nistico@unina.it Marco Bertoni: University of Padova, Department of Economics and Management “Marco Fanno”. Email: marco.bertoni@unipd.it. Simone Chinetti: University of Naples Federico II, Department of Economics and Statistics. Email: simone.chinetti@unina.it. We thank Sonia Bhalotra, Tito Boeri, Giorgio Brunello, Pierre Cahuc, Lorenzo Cappellari, Andrew Clark, Conchita D’Ambrosio, Francis Kramarz, Cristina Lafuente, Anthony Lepinteur, Monica Langella, Giovanni Mastrobuoni, Julian Messina, Lorenzo Pandolfi, Giovanni Pica, Francesco Principe, Enrico Rubolino, Raffaele Saggio, David Seim, Olmo Silva, Kostantinos Tatsiramos, seminar participants at the ifo institute, the University of Alicante, the Johannes Kepler University Linz, and participants at the 2025 AIEL Workshop “Advances in Research on Labour Market Policies”, the 37th ESPE Conference, the 2023 EALE Conference, the 38th AIEL Conference, the 3rd IEB Workshop on Public Policies, the Bordeaux School of Economics “1st Welfare & Policy Conference”, the University of Naples Federico II Workshop on “Human Capital, Labour Markets and Public Policies”, and the 1st Badolato Labour and Organization Workshop (BLOW) for valuable comments. The research is funded by the European Union - Next Generation EU, in the framework of the GRINS - Growing Resilient, Inclusive and Sustainable Project (GRINSPE00000018 – CUP E63C22002140007). The views and opinions expressed are solely those of the authors and do not necessarily reflect those of the European Union, and the European Union cannot be held responsible for them. Roberto Nisticò also acknowledges funding from the Finanziamento della Ricerca di Ateneo (FRA) research grant of the University of Naples Federico II.
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