Job Protection and Mortgage Conditions: Evidence from Italian Administrative Data*

This paper combines administrative data from the Italian social security administration and proprietary data from a major Italian commercial bank to analyse the impact of job protection legislation on mortgage conditions. An exogenous change in the degree of job protection against individual dismissals of workers with open-ended contracts is identified by exploiting the labour market reform of 2015, the ‘Jobs Act’, which weakened the employment protection of new hires at medium-sized and large private firms. We find that the lessening of job security led to lower mortgage amounts and a fall in leveraging capacity, as measured by the loan-to-value ratio. The impact of job insecurity is mitigated by the presence of co-mortgagors; it is aggravated for young and low-income mortgagors.