Abstract

In this article we analyse the impact of the 1998 Italian Fiscal Reform on the effective labour demand. In the first part, we introduce a model which analyses the impact of fiscal policy on both the number of employees and the hours worked. We show that the Reform encourages a more intensive utilisation of the existing labour force instead of leading to new hirings. In the second part, we run a numerical simulation on a sample of Brescia manufacturing firms. We show that the IRAP tax rate should drop below 3% in order to obtain the pre-Reform level of workers demand.