Antonio Genovese (University of Naples Federico II)
This paper uses administrative data to analyze the impact of payroll tax incentives on young workersÂ’ employment and wages. I exploit the variation induced by a 2018 Italian policy, which implemented a 50% payroll tax cut to hire individuals under 35 years old with no prior spell of permanent employment. The policy defines an ideal setting for a quasi-natural experiment, with the eligibility criterion determined by the 35-year age threshold. I find a significant increase both for temporary and permanent hirings for eligible workers after the introduction of the policy. There is suggestive evidence that the policy improved job stability for young workers, as reflected by an increase in the use of permanent contracts relative to temporary ones. Additionally, the probability of transitioning to permanent employment for younger workers in the labor market increased. Finally, the analysis shows that the policy had small or no effects on workersÂ’ wages, suggesting no significant pass-through of the payroll tax incentive to the workers.