Jobs for the Long-Term Unemployed: Place-Based Policies in Depressed Areas

Abstract

We provide new evidence on the effectiveness of hiring subsidies that target the long-term unemployed, by analysing a place-based policy, which encouraged permanent employment in the Italian South, an area characterised by a low participation rate and high levels of informal employment. To achieve identification, we use a triple difference estimator, which exploits three sources of variation: (i) the subsidy was only for the long-term unemployed and not for the short-term ones; (ii) although it was also available in Centre-North, it was significantly more generous in the South; (iii) it was in place until 2014. We find evidence that the policy facilitated access to permanent employment: after the program ended, the relative probability of finding a permanent job dropped for eligible individuals in southern regions. This effect does not seem to be driven by substitutions over time, across contracts or among jobseekers. An analysis of fiscal sustainability shows that the policy was globally in surplus. In terms of long-term effects, subsidised contracts used to last longer than non-subsidised ones.