Temporary Work Agencies in Italy: A Springboard Toward Permanent Employment?

Giornale degli Economisti - 64 (2005), 1-27

joint with Andrea Ichino and Fabrizia Mealli

This paper measures to what extent Temporary Work Agency (TWA) employment creates a “springboard” toward permanent jobs, or a “trap” of endless precariousness. Applying Propensity Score matching in the presence of choice-based sampling, we estimate the causal effect of the treatment “TWA assignment” on the outcome “finding a permanent job after 18 months”. The data come from Italy, where TWA employment was liberalized in 1997, and they were specifically collected for this evaluation study. We show that a TWA assignment increases the probability of finding a permanent job by 19 percentage points in Tuscany and by 11 percentage points in Sicily, although this second effect is only barely significant. These effects are large given that the observed baseline probabilities in the treated group are respectively 31% and 23% in the two regions. This treatment effect is highly heterogeneous with respect to observable characteristics such as age, education and firm’s sector.