Emanuele Ciani (Bank of Italy)
Giuseppe Albanese, Gabriele Macci, Graziella Mendicino and Andrea Petrella
We study the Decontribuzione Sud program, introduced in 2020 to improve the competitiveness of firms operating in Southern Italy through a substantial reduction in social security contributions. Using administrative data from INPS and the National Registry of State Aids, we document the characteristics of firms that took up the measure, investigate the sources of its lower-than-expected participation rate, and examine its interactions with other incentive schemes and State aid regulations. Exploiting a border discontinuity design along the boundary of the eligible Southern regions, we estimate the programs impact on employment and key financial outcomes. We find that the reduction in labour costs raised sales and profitability, but had no measurable effect on employment or wages; the resulting profitability gains translated into improved firm liquidity rather than higher investment.