The effects of youth labour market reforms: evidence from Italian apprenticeships

Abstract In this paper, we estimate the causal effects of the 2003 reforms to the Italian apprenticeship contract that increased its legal length, allowed on-the-job training and introduced a minimum floor to apprentices’ wages. Using administrative data, we implement a covariate balancing propensity score and a difference-in-differences estimator. We find that the new contract improves the chances of an apprentice obtaining a permanent job in the same firm five years after hiring; however, this occurs more frequently in large firms. We also find sizeable, long-run wage effects that extend well beyond the legal duration of the apprenticeship contract. These effects are compatible with increased human capital accumulation, possibly due to the reformed training provisions.