Evaluating the employment impact of hiring incentives in Italy Pilot Projects to carry out ESF related Counterfactual Impact Evaluations Brussels, 7 th May 2014 Building J27 – 01/071

Project overview Pilot project to assess the impact on employment of hiring incentives co-financed through the European Social Fund (ESF) in three Italian regions Lead applicant: Fondazione G. Brodolini Partners: ESF Managing Authorities of Calabria, Marche and Umbria Regions Duration: 12 months starting on the 26 th of March 2014

Project overview Carrying out counterfactual evaluations in order to assess the impacts of different measures aimed at: – Fostering job creation in Calabria – increasing the share of employees with a permanent contract over total number of employees in Marche and Umbria and, in so doing, strengthening the evaluation capacity of regional administrations in charge of managing ESF measures. The evaluation of these measures is important for a number of reasons: 1.First, both types of measures are currently drawing attention in the policy debate to foster job creation and labour demand (similar measures have been recently enacted at national level) 2.Second, the impact itself of this kind of measures on employers’ hiring behaviour is questioned at academic and policy level. Main criticisms are i) incentives are “only” a prize for decisions that would have occurred also in the absence of the intervention, and ii) the phenomenon of displacement (or crowding out) according to which incentives move firms' choices in favour of certain individuals, or change the temporal patterns of recruitment choices (temporal displacement) without generating additional employment nor growth in the share of stable employment 3.Third, little empirical evidence on the effects of this kind of measures is available

Interventions Subject to Evaluation CALABRIA: incentives for regional employers hiring disadvantaged and severely disadvantaged workers (ex EU Regulation 800/2008) and disabled workers (L.68/1999) residing in the Region  Funded for € 30 mln within ESF Axis II “Employability”  Eligibility conditions: the employer has to increase the occupational basis  Incentives: from 50 to 75% of total labour costs for a period from 12 to 36 months

Interventions Subject to Evaluation MARCHE: incentives for the regional employers who hired with permanent contracts up to 3 people previously working with atypical or fixed-term contracts  Funded for € 2.1 mln in 2011 and 2.8 mln 2012 within ESF Axis II “Occupability”  Maximum incentive: € for workers employed with full-time contract (proportionally reduced for part-time workers)

Interventions Subject to Evaluation UMBRIA: incentives for the employers located in Umbria who: (i) Transform contracts of workers with atypical or fixed-term contracts into open-ended ones; (ii) Hire unemployed people who were previously working with fixed- term contracts.  For feasibility reasons only point (i) will be evaluated  The incentive was funded within ESF Axis I “Adaptability” for a total amount of € 3.3 mln  Each conversion of an atypical or fixed-term contract into an open-ended contract gave right to up to 9,000 € lump-sum transfer to the employer.

Activities Phase 1: Data collection and preparation of the dataset for the analysis (months 1-3)  Sources: ESF monitoring data; “Comunicazioni obbligatorie” archive (employers’ compulsory administrative data concerning contractual changes of employees) Phase 2: Empirical analysis of data (months 4-9) Phase 3: Drafting of the intermediate and final report (months 8-10 and respectively) Dissemination:  A workshop in each region (to be held at Catanzaro, Ancona, Perugia)  Project seminar (Brussels)  Final conference (Rome)

Methodological Approach Counterfactual Impact Evaluation (CIE) allows to isolate and measure the impact of a programme/policy measure Comparison of beneficiary results with results of a group of similar non-beneficiaries (i.e. control group) Practical issue: how does one build the control group?  In principle, it is to be composed by firms that did not benefit from the incentives and have similar characteristics to the treated firms  The Consortium will consider to ask for support and advice from the Centre for Research on Impact Evaluation (CRIE) on the appropriate methodologies in the light of the data availability, in particular on the adequacy and selection of the control group

Methodological Approach Two alternative methodological approaches to be followed according to the number of rejected applicants suited to constitute the control group:  Scenario A: rejected applicants represent a reliable control group  control group: rejected applicants  difference in difference (D-in-D) approach combined with Propensity Score Matching (PSM) methods  Scenario B: rejected applicants do not constitute a reliable control group  control group selected using PSM methods consisting of non-beneficiary firms with the most similar observable characteristics as well as recruitment patterns in the period previous to the intervention to those of beneficiaries  Propensity Score Matching in all regions

Methodological Approach The data for the analysis will be provided by linking – through unique tax identifiers – the Comunicazioni Obbligatorie administrative database and MA monitoring data on funded and (if possible) rejected applicant firms The Comunicazioni Obbligatorie database – covers all contractual changes (new hirings, as well as the renewals, changes and terminations of ongoing contracts) occurred in the regions from March 2008 onwards; – provides a wide set of detailed information on the characteristics of the related contracts (legal typology, starting and ending dates, profession at the 3 rd digit of ISCO-2008 classification), firm (location at the province level, and sector of activity at the 5 th digit of the Nace rev.2 classification), and worker (gender, age, place of birth and residence, and educational qualifications)

State of implementation Phase 1 Mobilisation of partners, including administrative provisions Data collection and transfer: identification of necessary information, assessment of availability and usability of data for each regional authority (re. measures to be analysed, data on “compulsory communications”, lists of beneficiaries, list of applicants) Website: design and content under preparation to be validated during kick-off meeting Organisation of kick-off meeting (22 nd May in Rome)

Thanks for your attention Giancarlo Dente Rome Office Via Barberini Rome, Italy Brussels Office Avenue Marnix 19A 1000 Brussels, Belgium