Pietro Galeone (Bocconi University)
With the growing focus on skills, dual contracts such as internships and apprenticeships are being promoted as hybrid training-working opportuni- ties for young workers to enter the labor market. Workers, however, also have a preference for job stability and do not value these training contracts equally. In this paper, I focus on the effect of the expansion of more precari- ous opportunities, such as internships, on the wage of more stable long-term contracts, such as apprenticeships. I develop a simple model whereby two effects can be simultaneously at play when new legislation increases the share of precarious contracts that can be activated: 1) a selection effect in- creases the aver- age wage of permanent contracts since the most productive workers are offered a permanent contract; 2) a dumping effect decreases the average wage since entrant workers are willing to bargain lower wages in exchange for the stability of a permanent contract. Using the latest legislative change to internships in Italy, I am able to exploit interregional variation and estimate the overall effect on apprenticeship wages, revealing that the dumping effect is prevalent.