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The Employment Effect of Reforming a Public Employment Agency

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  • Andrey Launov
  • Klaus Wälde

Abstract

By how much does an increase in operating effectiveness of a public employment agency (PEA) and a reduction of unemployment benefits reduce unemployment? Using a recent labour market reform in Germany as background, we find that an enhanced effectiveness of the PEA explains about 20% of the observed post-reform unemployment decline. The role of unemployment benefit reduction explains just about 5% of the observed decline. Due to disincentive effects resulting from the reform, the reform of the PEA could have had an even higher impact on unemployment reduction if there had been less focus on long-term unemployed workers.

Suggested Citation

  • Andrey Launov & Klaus Wälde, 2015. "The Employment Effect of Reforming a Public Employment Agency," CESifo Working Paper Series 5477, CESifo.
    • Handle: RePEc:ces:ceswps:_5477
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    More about this item

    Keywords

    employment agencies; unemployment benefits; labour market reform; unemployment; structural model;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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