Hiring Subsidies and Firm Growth: Some New Evidence from Italy

Hiring subsidies are among the most widely used policies to support employment growth for certain groups of workers or disadvantaged geographic areas. In this article, we analyze the medium-run consequences of a generous, non-targeted permanent hiring subsidy implemented throughout Italy in 2015, which was widely used by firms. The results indicate that firms benefiting from the subsidy increased in size. However, compared to other firms, the growth rate of capital–labour ratio and value added per worker were lower after the subsidy. We conclude that policies to stimulate hiring must be accompanied by other interventions to support capital accumulation.