Do “good neighbors” enhance regional performances in including disabled people in the labor market? A spatial Markov chain approach

Abstract

The purpose of this study was to examine whether the performance of Italian regions in providing employment of disabled people according to Law 68/99 can be affected by the performance of neighboring regions. Hence, we propose a two-step analysis focusing on Italian regions for the period 2000–2009. In the first step, we verify by means of Stochastic Frontier Approach that Central and Northern Italy regions are more efficient than Southern Italy ones in the matching process between demand and supply of jobs for disabled people. Then, the efficiency results are analyzed using a Markov Spatial Transition Matrix in order to provide insights into the transitions of regions between different efficiency levels, taking their local context into account. The results of this analysis show that good neighbors are important in promoting the improvement of regions’ performance. However, the effects produced by bad neighbors should not be underestimated, especially when they are concentrated in an area of the country and show a time-space persistence. The effect of a persistent dualism on the performance of Italian regions with respect to the application of Law 68/99 represents a problem for policy-makers. Hence, they must seriously consider it, especially when regions with low efficiency scores are surrounded by neighbors with poor efficiency score and show an unhealthy poorly performing labor market.

Appendices

Appendix 1

1.1 Law 68/99 (from now on Law 68/99): some clarifications

Law 68/99 is addressed to: “the working-age people suffering from physical, mental or sensory and intellectual disabilities, resulting in a reduced capacity to work for more than 45 percent...,” “Disabled from work with a degree of incapacity of more than 33 percent...,” “the blind or the deaf-mute...,” “war invalids, civil war invalids and disabled with disabilities ascribed from the first to the eighth category....”

The prerequisite to take advantage of the benefits provided by Law 68/99 is the inclusion in the compulsory employment lists that are held by the Employment Services of the provincial governments. Employment services usually enroll the applicant in the lists of compulsory employment conditionally to further assessment of disability by healthcare bodies. Next to the entering, the disabled person is then able to join the job opportunities that come to the Employment Service from both public bodies and private companies, by filling out the form reservation.

The inclusion of people with particularly serious handicap may be facilitated by an ad hoc employment situation, i.e., social cooperatives of type B in order to allow them to learn about the assigned task.

Law 68/99 provides that private employers can sign a contract with these cooperatives, in order to temporarily employ the disabled person in the same social cooperatives, to which employers agree to assign work orders. This special three-sided employment contract represents the novelty introduced by this law.

Appendix 2

As OY is a combined variable, it may be interesting to discover whether the effect is mainly connected to young or old people. To this purpose, we decompose the variable coefficient in the following way:²⁸

$$\begin{aligned} {\hat{\beta }}_{OY}&= \frac{\partial Ln( ERDP )}{\partial Ln\left( {\textit{OP}/\textit{YP}} \right) }\\ \frac{1}{{\hat{\beta }}_{OY}}&= \frac{\partial Ln\left( {\textit{OP}/\textit{YP}} \right) }{\partial Ln( ERDP )}=\frac{\partial }{\partial Ln( ERDP )}\left( { LnOP - LnYP } \right) , \end{aligned}$$

where ERDP denotes the employment rate of disabled people, OP the old people and YP the young people.

Now we define the elasticity of the employment rate of disabled people with respect, respectively, to variable YP and OP as:

$$\begin{aligned} \beta _Y&=\frac{\partial Ln( ERDP )}{\partial LnYP } \\ \beta _O&=\frac{\partial Ln( ERDP )}{\partial LnOP } \end{aligned}$$

Hence, we have

$$\begin{aligned} \frac{1}{\hat{\beta }_{OY}}=\frac{1}{\beta _O }-\frac{1}{\beta _Y } \end{aligned}$$

and consequently:

$$\begin{aligned} {\hat{\beta }}_{OY} =\frac{\beta _O *\beta _Y }{\beta _Y -\beta _O } \end{aligned}$$

Since we are thinking in terms of inefficiency, we can conclude that ${\hat{\beta }}_{OY} >0$ if $\beta _Y >\beta _O$. The positive sign results in an inefficiency increase of regions in their application of Law 68/99.

On the contrary, we have ${\hat{\beta }}_{OY} <0$ if $\beta _Y <\beta _O$; in this case, the negative sign results in a reduction of regions’ inefficiency in the application of Law 68/99.