Temporary jobs and increasing inequality for recent cohorts in Italy

Using tax-based longitudinal microdata from 1985 to 2016, I document how the widening income distribution in Italy is driven by younger cohorts. Entry wages started to decrease around the mid-1990s, at the same time returns to experience of new entrants in the labour market declined. Falling wage growth is linked to the institutional changes that occurred in the Italian labour market in the decade across the 2000s. I examine the impact of Italian labour market reforms on cohort-specific wage inequality by looking at the relationship between the number of temporary job spells and individual earnings. Results confirm that young and high-skilled new entrants show higher wage differential in comparison to older workers and that the increase in temporary jobs is a crucial factor in explaining the cohort wage gap.