Piero Cipollone

Social Interactions in High School: Lessons from an Earthquake

We provide new evidence on the impact of peer effects on the schooling decisions of teenagers. In November 1980 a major earthquake hit Southern Italy. In the aftermath, young men from certain towns were exempted from compulsory military service. We show that the exemption raised high school graduation rates of boys by more than 2 percentage points by comparing high school graduation rates of young exempt men and older not exempt men from the least damaged areas and men of the same age groups from nearby towns that were not hit by the quake. Similar comparisons show that graduation rates of young women in the affected areas rose by about 2 percentage points. Since in Italy women are not subject to drafting, we interpret these findings as evidence of social effects of the decision of teenage boys of staying longer in school on that of teenage girls. Our estimates suggest that an increase of 1 percentage point of male graduation rates raises female probability of completing high school by about 0.7-0.8 percentage points. A series of robustness checks, including comparisons across different age groups and with different definitions of the comparison areas, suggest that the rise was due to the earthquake-related exemption, rather than other factors.

Employment Growth in Italy in the 1990s: Institutional Arrangements and Market Forces

The chapter analyses the broad picture emerging from the 1993 incomes policy agreement in Italy as well as other policy actions (and omissions). The agreement was successful in producing a remarkable moderation of the relative price of labour - despite the reduction of the user cost of capital driven by the fall in interest rates – and an increase in labour demand and employment. In spite of this, however, the intensified international competition made structural problems of Italian industry much more severe, with negative effects on the growth of output and exports, and eventually employment.

University Drop-Out - The Case of Italy

We combine individual and aggregate-level level data on educational attainment to study the determinants of university drop-out in Italy, one of the worst performers among developed countries. Based on detailed information on a representative sample of secondary school graduates and on local university supply we first show that family and educational background are relevant determinants of continuation probability. In particular, our results show that accounting for enrollment-induced sample selection significantly enhances the estimated coefficients with respect to standard probit analysis. We then combine our estimates with data on family and educational backgrounds of secondary school graduates in comparable European countries and find that differences in endowments only explain a minor fraction of the observed cross-country gap in studentsi?½ attainments.

The value of flexible contracts; evidence from an italian panel of industrial firms

Since the mid-1980s fixed-term contracts have been used in many European countries to reduce firing costs. As this strategy may have led to segmented labour markets, recent policy interventions have enhanced permanent jobs by cutting their labour costs. Efficient design of these policies requires knowledge of the costs associated with employment protection legislation. In this paper we evaluate these costs by measuring firmsi?½ willingness to trade fixed-term for open-ended contracts in exchange for a cut in the labour cost of permanent jobs. Our results are based on a panel of Italian firms in the engineering sector whose labour costs were reduced by a tax credit granted to firms hiring workers on open-ended rather than fixed-term contracts. The trade-off is identified by comparing how the composition of recruitment by type of contract changed for firms that received the tax credit and those that did not. Potential distortions due to self-selection into the programme, firm-specific timevarying shocks or mechanical correlation induced by the selection rule into the programme, are accounted for by estimating the spurious effect of the tax credit in the years when it was not in force. Estimation is carried out in both a parametric and non-parametric setting that uses p-score to control for different probabilities of receiving the tax credit. We found that firms value the possibility of hiring one per cent new workers on a fixed-term contract as much as a cut in the labour cost of an open-ended worker in the range of 1.3-2.8 per cent. This result helps to explain recent employment growth in Italy, where the share of fixed-term contracts among new hires grew from 34 to 42 per cent between 1995 and 2003. Using our most conservative results, we evaluate that the labour cost reduction associated with this expansion amounted to anything between 10.4 and 22.4 per cent. Given the elasticity of employment to wages, the advent of flexibility in the Italian labour market can account for a large share, between 37 and 80 per cent, of employment growth in the private sector.

The private and social return to schooling in Italy

We estimate the private (individual) and social return to schooling in Italy and four macro regions. Our estimates take into account the effects of schooling on employment and wages as well as the key features of the Italian tax and social insurance system. We find that the individual return to schooling compares favorably to the return to financial assets (especially in the South). At the social level, the available infrastructure-capital data indicates that the return to schooling exceeds that to infrastructures in the South.

Schooling and Youth Mortality: Learning from a Mass Military Exemption

This paper examines the relationship between education and mortality in a young population of Italian males. In 1981 several cohorts of young men from specific southern towns were unexpectedly exempted from compulsory military service after a major quake hit the region. Comparisons of exempt cohorts from the least damaged towns on the border of the quake region with similar ones from neighbouring non-exempt towns just outside the region show that, by 1991, the cohorts exempted while still in high school display significantly higher graduation rates. The probability of dying over the decade 1991-2001 was also significantly lower. Several robustness checks confirm that the findings do not reflect omitted quake-related confounding factors, such as the ensuing compensatory interventions. Moreover, cohorts exempted soon after high school age do not display higher schooling or lower mortality rates, thus excluding that the main findings reflect direct effects of military service on subsequent mortality rather than a causal effect of schooling. The authors conclude that increasing the proportion of high school graduates by 1 percentage point leads to 0.1-0.2 percentage points lower mortality rates between the ages of 25 and 35.

Financial support to permanent jobs. The Italian case

In the past decade fixed-term contracts have been widely used to ease the regulatory burden in several European labour markets. Since there is some concern that they might be a dead-end for many workers, policy makers have intervened to increase transitions from fixedterm to open-end contracts. The effects of these interventions have not yet been thoroughly studied. This paper is a contribution to fill this gap. We look at a recent Italian policy designed to foster hiring with open-end rather than with fixed-term contracts. Our results seem to indicate that most of the financial support was wasted because of the large dead-weight loss associated with the program. There exists some weak evidence that better educated workers benefited from the introduction of the tax credit, especially in the South.

Urban Poverty in Developed Countries

In this paper we investigate the urban/rural dimension of poverty in developed countries. We provide original estimates for Italy, we gather published statistics for France and the United States, and we produce novel cross-country estimates from the LIS database. We show that the size of urban poverty depends on where the boundaries of metropolitan districts are drawn and we observe that overlooking geographical differences in the cost of living is a particularly relevant hypothesis. We find that in France and the United States post-war economic growth and urbanisation were accompanied by a substantial reduction of the poverty risk for the rural population, while poverty rates improved less, or even sometimes deteriorated, for the urban population. The lack of a standard definition of urban/rural area precludes a rigorous comparative study. Our results indicate, however, that only in few countries (Denmark, the United Kingdom and the United States) the greatest poverty rates are found in central cities, while in all other developed countries poor persons are still relatively more frequent in rural areas. This pattern is stronger in the four non-developed economies examined here.

Hiring incentives and labour force participation in Italy

A long-standing economic tradition maintains that labour supply reacts to market tightness; its sensitivity to job quality has received less attention. If firms hire workers with both temporary and open-end contracts, does participation increase when more permanent jobs are available? We investigate this relationship within a policy evaluation framework; in particular, we examine how labour supply reacted in Italy to a recent subsidy in favour of open-end contracts. This subsidy increased labour force participation by 1.4% in 2001 and 2.1% in 2002. This increase was concentrated on males aged 35-54, with a low or at most a secondary schooling level, and might be due to the choice to leave undegraound economy.