Evaluating the impact of unemployment benefit reforms on career stability in Italy: evidence from a regression discontinuity analysis

Abstract

This paper evaluates the labor market effects of Italy’s 2015 unemployment insurance reform, which replaced an age-based schedule of potential benefit duration (PBD) with a contributory formula linking entitlement to prior employment histories. Using administrative data and a regression discontinuity design around the May 1, 2015 cutoff, I identify intensive-margin effects by exploiting discontinuities in PBD among workers satisfying baseline eligibility requirements. The reform increases PBD by approximately 19 weeks. Greater benefit generosity significantly raises unemployment insurance take-up and realized benefit duration, lengthens non-employment duration by about 45 days, and reduces job-finding probabilities within 30 and 90 days. Despite longer search spells, I find no evidence of improvements in post-unemployment job quality, including transitions to permanent contracts or wage gains. Responses increase with the reform-induced change in PBD, highlighting a trade-off between expanded income insurance and delayed re-employment.