The market for job placement : a model of head-hunters
AbstractThis paper deals with the consequences of the existence of private employment agencies on the labor market. Using a matching framework, we study the conditions of existence of private employment agencies and the consequences of competition on the market for job placement. We show that the private employment agencies enter in the labour market only if they are much more efficient than the private agency. Moreover, the level of the unemployment benefits is a disincentive to manage workers for the private agency. Because of a high fallback position for the worker, it is costly for the private employment agency to manage a worker having some low probabilities to exit from unemployment. If these conditions are satisfied, the existence of private employment agencies improves the labor market through shorter unemployment spells and a lower unemployment rate. Moreover, an improvement in the matching process is an incentive for the firms to post vacancies at the private agencies. Nevertheless, the workers managed by the private agencies receive some lower wages than the other workers because of the payment by the firm for recruiting a worker. Finally, we show that private employment agencies have a natural disincentive to manage unskilled workers. But, the introduction of a subsidy to match an unskilled worker with a vacancy seems to be a sufficient incentive to make the private employment agencies managing unskilled workers.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1) in its series Cahiers de la Maison des Sciences Economiques with number v06027.
Length: 41 pages
Date of creation: Jul 2005
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Unemployment; matching model; public employment agencies; private employment agencies.;
Find related papers by JEL classification:
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
- J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
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