Filippo Passerini (University of Bologna)

Labor Seminar

Do alternative work arrangements substitute standard employment? Evidence from worker-level data

Abstract. This paper uses Italian administrative data to examine the impact of an Alternative Work Arrangement (AWA) called the “voucher” on income trajectories. Specifically, we investigate whether this form of work substitutes income from standard labor contracts and welfare transfers. We estimate cross-income elasticities using a fixed effects specification and an estimator that controls for the endogenous selection of individuals in the labor market selection. Results show that the vouchers increase overall labor income and substitute standard contracts. However, when selection is taken into account, the positive effect on total labor income is smaller, while the substitution effect becomes more pronounced. We also conduct an event study that takes into account an individual threshold on voucher earnings. We find that when the threshold is reached, voucher income decreases and so does overall income, while welfare transfers and labor income remain unaffected. Overall, our findings suggest that AWAs tend to substitute standard employment, with small positive net effects on earnings. The benefits are more significant for intensive users and those more likely to fall into the informal labor market