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The Dilemma of Delegating Search: Budgeting in Public Employment Services

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  • Addison, John T.

    ()
    (University of South Carolina)

  • Altemeyer-Bartscher, Martin

    ()
    (Chemnitz University of Technology)

  • Kuhn, Thomas

    ()
    (Chemnitz University of Technology)

Abstract

The poor performance often attributed to many public employment services may be explained in part by a delegation problem between the central office and local job centers. In markets characterized by frictions, job centers function as match-makers, linking job seekers with relevant vacancies. Because their search intensity in contacting employers and collecting data is not verifiable by the central authority, a typical moral hazard problem can arise. To overcome the delegation problem and provide high-powered incentives for high levels of search effort on the part of job centers, we propose output-related schemes that assign greater staff capacity to agencies achieving high strike rates.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5170.

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Length: 24 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:iza:izadps:dp5170

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Related research

Keywords: matching unemployment; public employment service; delegation problem; moral hazard; search theory;

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  1. Gregg, Paul & Wadsworth, Jonathan, 1996. "How Effective Are State Employment Agencies? Jobcentre Use and Job Matching in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 443-67, August.
  2. Chiappori, P.A. & Macho, I. & Rey, P. & Salanié, B., 1989. "Repeated Moral Hazard: The Role of Memory, Commitment, and the Access to Credit Markets," DELTA Working Papers 89-18, DELTA (Ecole normale supérieure).
  3. Addison, John T. & Portugal, Pedro, 1998. "Job Search Methods and Outcomes," ZEW Discussion Papers 98-41, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  5. Jones, Stephen R G, 1989. "Job Research Methods, Intensity and Effects," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(3), pages 277-96, August.
  6. Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, vol. 61(3), pages 290-301, June.
  7. Winter-Ebmer, Rudolf, 1991. "Some Micro Evidence on Unemployment Persistence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 53(1), pages 27-43, February.
  8. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  9. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 637-55, June.
  10. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
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