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The decentralization of public employment services and local governments’ responses to incentives

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  • Jeremias Nieminen
  • Ohto Kanninen
  • Hannu Karhunen

Abstract

We examine how the decentralization of public employment services (PES) affects the behavior and service provision of PES offices and the labor market outcomes of job seekers. We use difference-in-differences, utilizing a Finnish temporary reform during which PES were decentralized for specific groups of job seekers in treated municipalities and remained centralized for others. The reform presented the treated municipalities with the possibility of shifting costs to the central government. We find no evidence of better labor market outcomes and find evidence consistent with municipalities being able to shift 10% of their unemployment benefit costs to the central government.

Suggested Citation

  • Jeremias Nieminen & Ohto Kanninen & Hannu Karhunen, 2023. "The decentralization of public employment services and local governments’ responses to incentives," Journal of Economic Geography, Oxford University Press, vol. 23(6), pages 1371-1395.
  • Handle: RePEc:oup:jecgeo:v:23:y:2023:i:6:p:1371-1395.
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    More about this item

    Keywords

    Public employment services; cost-shifting; fiscal federalism; decentralization;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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