Labour Supply and Incentives to Work in Europe
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Labour Supply and Incentives to Work in Europe

Edited by Ramón Gómez-Salvador, Ana Lamo, Barbara Petrongolo, Melanie Ward and Etienne Wasmer

Labour Supply and Incentives to Work in Europe highlights recent developments in the labour supply in Europe and gives a detailed assessment of their link with economic policies and labour market institutions. Despite major changes in European labour supply during the past few decades, the existing literature still lacks a comprehensive study of the relationship between labour supply and labour market institutions from a macro perspective.
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Chapter 6: Hiring Incentives and Labour Force Participation in Italy

Piero Cipollone, Corrado Di Maria and Anita Guelfi


1 Piero Cipollone, Corrado Di Maria and Anita Guelfi2 INTRODUCTION A long-standing economic tradition maintains that labour supply is sensitive to the tightness of the labour market. Increases in labour demand are not fully and immediately reflected in declines in the number of unemployed because of the positive elasticity of supply to labour demand. This empirical regularity is in part a statistical artefact because not all job seekers are included in the unemployment pool as defined by international standards. According to the generally accepted definition of unemployment, based on the ILO (1982) Resolution, a person is unemployed if, being above a specified age,3 he or she has no occupation in the reference period, is available to start to work and has actively looked for a job during the four weeks preceding the reference period. The ambiguity comes from the fact that many people might be willing to work but are not searching according to the ILO definition. Jones and Riddell (1999) have found that in Canada this group – which they call the ‘marginally attached’ – represents between 25 and 35 per cent of the unemployed. People belonging to this pool have a probability of transiting into employment which is lower than that of the unemployed, but much higher than that of those who do not want to work. Thus they constitute an intermediate category between job seekers and those who are out of the labour force. Brandolini et al. (2003) found similar results for...

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