The Laffer effects of a program of deregulation cum detaxation: the Italian reform of labour contracts in the period 1997-2001

We examine the Laffer effects of the policy of social security tax reduction cum partial deregulation of labour market undertaken in Italy in the period 1997-2001. Laffer effects of tax cut are generally delayed and governments responsible of the reform cannot benefit from the resulting increased revenues when in office. Our empirical findings show that tax cuts combined with policies of liberalization determine almost immediate Laffer effects. In terms of coherent supply-side political programs, the effects of the two measures are not separable. Reflection on our results may broaden the scope of the supply-side policies of deregulation and detaxation.