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The CFL (On-the-job Training) programme was introduced in Italy in 1985 with the aim of reducing  youth unemployment. The new programme offered employers two main advantages: it  exempted them almost completely from  payment of payroll taxes and it provided them with  virtually the only opportunity to employ people on a basis of fixed term contracts.The paper looks at the employment impact of the programme among a subgroup of eligible workers and finds that firms taking part increased employment more than non-participating firms by almost 5%. Employers had a strong positive reaction to the tax subsidies and to the softening of the rigid employment code. The overall effect  of the programme  on youth employment was however  limited, registering only a 1% increase, mainly because  about 80%  of  firms never participated.

journal for labour market research

Can employment subsidies and greater labour market flexibility increase job opportunities for youth? Revisiting the Italian On-the-job Training Programme