Two-tier labor market reform and entry wage of protected workers: evidence from Italy

Abstract

This study aims at investigating whether wages of workers entering positions entitled to employment protection are affected by the introduction of a two-tier labor market regime. Difference-in-differences estimators—also combined with propensity score matching—are applied to repeated cross section microdata to evaluate the impact of a reform deregulating the Italian labor market in 2003. The results are robust and show that after the policy implementation protected entrants experienced a reduction in earnings of about \(-\)4.5 %.