Long-Term Unemployed hirings: Should targeted or untargeted policies be preferred?

TL;DR

This study compares targeted versus generalized hiring incentives for long-term unemployed in Italy, finding targeted policies more effective without significant negative side effects.

Contribution

It provides empirical evidence on the relative effectiveness and side effects of targeted versus generalized hiring incentives using administrative data.

Findings

Targeted policies significantly increased hirings of long-term unemployed.

Generalized policies did not significantly impact the vulnerable group.

No significant negative side effects from targeted policies.

Abstract

To what extent, hiring incentives targeting a specific group of vulnerable unemployed (i.e. long term unemployed) are more effective, with respect to generalised incentives (without a definite target), to increase hirings of the targeted group? Are generalized incentives able to influence hirings of the vulnerable group? Do targeted policies have negative side effects too important to accept them? Even though there is a huge literature on hiring subsidies, these questions remained unresolved. We tried to answer them, comparing the impact of two similar hiring policies, one oriented towards a target group and one generalised, implemented on the italian labour market. We used administrative data on job contracts, and counterfactual analysis methods. The targeted policy had a positive and significant impact, while the generalized policy didn't have a significant impact on the vulnerable group. Moreover, we concluded the targeted policy didn't have any indirect negative side effect.