The Italian Economy and the End of the Multifiber Arrangement

We analyze the effect of the removal of the quota system in the textile and clothing (T&C) sector – the Mutifiber Arrangement followed by the Agreement on Textile and Clothing. The formal end occurred initially in the first half of 2005, but was fully completed as of January 1st 2009, and was characterized by a disruptive increase in Chinese low-quality imports. We use INPS data on the universe of private non-agricultural labor contracts to conduct the analysis at the firm level. The results highlight the disciplining effect on the firms operating in the T&C sector. In order to move towards a more high-quality segment of the market, T&C employment became more high-skilled. This is occurred via the restructuring of the existing firms and the exit of firms with low high-skill ratios. The current evidence is prima facie and validates the interest in further investigation.