Matching Efficiency and Labour Market Reform in Italy

A Macroeconometric Assessment

Published in: Labour, v. 21, no. 1, Mar. 2007, p. 57-84

Posted on RAND.org on December 31, 2006

by Sergio Destafanis, Raquel Fonseca Benito

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A matching theory approach is used to assess the impact on the Italian labour market of the 1997 Treu Act (legge Treu), which considerably eased the regulation of temporary work and favoured its growth in Italy. We re-parameterize the matching function as a Beveridge Curve and estimate it as a production frontier, finding huge differences in matching efficiency between the South and the rest of the country. The Treu Act appears to have improved matching efficiency in the North of the country, particularly for skilled workers, but also to have strengthened competition among skilled and unskilled workers, especially in the South.

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