Employment Subsidies, Informal Economy and Women

We analyse the effects of an active labour market program for disadvantaged workers recently implemented in an Italian depressed area. Our sample includes 859 workers, mostly women, who entered the program before April 2008 and were interviewed in 2009-10. We complement the existing administrative data with survey data that enables us to control for numerous individual and labour market characteristics for both treated and non-treated individuals. Using propensity-score matching methods, we find that the employment subsidy had a positive and significant effect (ATT) for participants on both the probability of finding a job and on their level of income. We also control for effect heterogeneity and find that the outcome of the policy was higher for women and, among them, we also find that the program was more effective on less educated and older female workers. Finally, we exploit unique information on previous contacts between workers and firms and on the use of informal channels for job search activity to explore the role of the program in promoting the transition from informal employment to a salaried economy.