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The Dilemma of Delegating Search: Budgeting in Public Employment Service

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  • John T. Addison

    ()
    (Department of Economics, University of South Carolina, Moore School of Business, Columbia, SC, USA; Chemnitz Institute of Technology, Chemnitz, Germany)

  • Martin Altemeyer‐Bartscher

    ()
    (Department of Economics, Chemnitz University of Technology, Chemnitz, Germany)

  • Thomas Kuhn

    ()
    (Department of Economics, Chemnitz University of Technology, Chemnitz, Germany)

Abstract

The Recent German research has suggested that extending the number of caseworkers may have a very positive effect on PES performance. The present paper accepts this key insight but argues that there are other factors that may independently drive outcomes and in particular local agents’ discretion. That is, it focuses on the delegation problem between the central office and the local job center ‘matchmakers.’ Because their (search) effort 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 increased 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 The Rimini Centre for Economic Analysis in its series Professional Reports with number 02_11.

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Date of creation: Nov 2011
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Handle: RePEc:rim:rimpre:02_11

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Keywords: matching unemployment; public employment service; active labor market policy; moral hazard; search theory;

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  1. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  2. 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.
  3. 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.
  4. Gronau, Reuben, 1971. "Information and Frictional Unemployment," American Economic Review, American Economic Association, American Economic Association, vol. 61(3), pages 290-301, June.
  5. 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.
  6. John T. Addison & Pedro Portugal, 1998. "Job Search Methods and Outcomes," Working Papers, Banco de Portugal, Economics and Research Department w199808, Banco de Portugal, Economics and Research Department.
  7. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, Elsevier, vol. 36(2), pages 269-300, November.
  8. 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.
  9. Chiappori, P.A. & Macho, I. & Rey, p. & Salanie, B., 1994. "Repeated Moral Hazard: The Role of Memory, Commitment, and the Acces to Credit Markets," Papers, Laval - Laboratoire Econometrie 06, Laval - Laboratoire Econometrie.
  10. Blau, David M & Robins, Philip K, 1990. "Job Search Outcomes for the Employed and Unemployed," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 98(3), pages 637-55, June.
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