IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_5245.html
   My bibliography  Save this paper

Labor Market Equilibrium with Public Employment Agency

Author

Listed:
  • Christian Holzner
  • Makoto Watanabe

Abstract

The Public Employment Agency (PEA) provides intermediation services in the labor market. We investigate the implications of having such an additional market place using a tractable search model, and explain why only a fraction of firms use the PEA as search channel despite its free service. We highlight the registering firms’ tradeoff between the negative selection of applicants and the lower wages possible at the PEA. Our theory also explains which job-types are more likely to be registered. We test these theoretical predictions empirically using the German Job Vacancy Survey and the German Socio-Economic Panel and find strong support for them.

Suggested Citation

  • Christian Holzner & Makoto Watanabe, 2015. "Labor Market Equilibrium with Public Employment Agency," CESifo Working Paper Series 5245, CESifo.
    • Handle: RePEc:ces:ceswps:_5245
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp5245.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Albrecht, James & Gautier, Pieter & Vroman, Susan, 2012. "A note on Peters and Severinov, “Competition among sellers who offer auctions instead of prices”," Journal of Economic Theory, Elsevier, vol. 147(1), pages 389-392.
    2. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-833, December.
    3. Peters, Michael & Severinov, Sergei, 1997. "Competition among Sellers Who Offer Auctions Instead of Prices," Journal of Economic Theory, Elsevier, vol. 75(1), pages 141-179, July.
    4. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    5. Casella, Alessandra & Hanaki, Nobuyuki, 2008. "Information channels in labor markets: On the resilience of referral hiring," Journal of Economic Behavior & Organization, Elsevier, vol. 66(3-4), pages 492-513, June.
    6. Fougère, Denis & Pradel, Jacqueline & Roger, Muriel, 2009. "Does the public employment service affect search effort and outcomes?," European Economic Review, Elsevier, vol. 53(7), pages 846-869, October.
    7. Galenianos, Manolis & Kircher, Philipp, 2009. "Directed search with multiple job applications," Journal of Economic Theory, Elsevier, vol. 144(2), pages 445-471, March.
    8. Holzer, Harry J, 1988. "Search Method Use by Unemployed Youth," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 1-20, January.
    9. Manolis Galenianos, 2013. "Learning About Match Quality and the Use of Referrals," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 668-690, October.
    10. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(4), pages 869-891.
    11. Adrian Masters, 2007. "Middlemen In Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 343-362, February.
    12. John T. Addison & Pedro Portugal, 2002. "Job search methods and outcomes," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 505-533, July.
    13. Watanabe Makoto, 2020. "Middlemen: A Directed Search Equilibrium Approach," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-37, June.
    14. Andrea Weber & Helmut Mahringer, 2008. "Choice and success of job search methods," Empirical Economics, Springer, vol. 35(1), pages 153-178, August.
    15. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    16. Claudio Michelacci & Javier Suarez, 2006. "Incomplete Wage Posting," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1098-1123, December.
    17. 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 637-655, June.
    18. 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 443-467, August.
    19. Watanabe, Makoto, 2010. "A model of merchants," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1865-1889, September.
    20. Yavas, Abdullah, 1994. "Middlemen in Bilateral Search Markets," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 406-429, July.
    21. Launov, Andrey & Wälde, Klaus, 2016. "The employment effect of reforming a public employment agency," European Economic Review, Elsevier, vol. 84(C), pages 140-164.
    22. Galenianos, Manolis, 2014. "Hiring through referrals," Journal of Economic Theory, Elsevier, vol. 152(C), pages 304-323.
    23. Delacroix, Alain & Shi, Shouyong, 2013. "Pricing and signaling with frictions," Journal of Economic Theory, Elsevier, vol. 148(4), pages 1301-1332.
    24. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    25. Guido Menzio, 2007. "A Theory of Partially Directed Search," Journal of Political Economy, University of Chicago Press, vol. 115(5), pages 748-769, October.
    26. John B. Wielgosz & Susan Carpenter, 1987. "The Effectiveness of Alternative Methods of Searching for Jobs and Finding Them: An Exploratory Analysis of the Data Bearing upon the Ways of Coping with joblessness," American Journal of Economics and Sociology, Wiley Blackwell, vol. 46(2), pages 151-164, April.
    27. Osberg, Lars, 1993. "Fishing in Different Pools: Job Search Strategies and Job-Finding Success in Canada in the Early 1980s," Journal of Labor Economics, University of Chicago Press, vol. 11(2), pages 348-386, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael Weber, 2016. "The short-run and long-run effects of decentralizing public employment services," ifo Working Paper Series 209, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hermann Gartner & Christian Holzner, 2015. "Wage Posting as a Positive Selection Device: Theory and Empirical Evidence," CESifo Working Paper Series 5494, CESifo.
    2. Rainer Eppel & Helmut Mahringer & Andrea Weber, 2014. "Job Search Behaviour and Job Search Success of the Unemployed," WIFO Working Papers 471, WIFO.
    3. Mangin, Sephorah, 2017. "A theory of production, matching, and distribution," Journal of Economic Theory, Elsevier, vol. 172(C), pages 376-409.
    4. Pieter Gautier & Bo Hu & Makoto Watanabe, 2023. "Marketmaking Middlemen," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 83-103, March.
    5. Rainer Eppel & Helmut Mahringer, 2019. "Getting a lot out of a little bit of work? The effects of marginal employment during unemployment," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(2), pages 381-408, May.
    6. Cai, Xiaoming & Gautier, Pieter A. & Wolthoff, Ronald P., 2017. "Search frictions, competing mechanisms and optimal market segmentation," Journal of Economic Theory, Elsevier, vol. 169(C), pages 453-473.
    7. Ronald Bachmann & Daniel Baumgarten, 2013. "How do the unemployed search for a job? – Evidence from the EU Labour Force Survey," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-25, December.
    8. Auster, Sarah & Gottardi, Piero, 2019. "Competing mechanisms in markets for lemons," Theoretical Economics, Econometric Society, vol. 14(3), July.
    9. Fougère, Denis & Pradel, Jacqueline & Roger, Muriel, 2009. "Does the public employment service affect search effort and outcomes?," European Economic Review, Elsevier, vol. 53(7), pages 846-869, October.
    10. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2017. "Competing with asking prices," Theoretical Economics, Econometric Society, vol. 12(2), May.
    11. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2014. "Competing with Asking Prices," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-37, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Matthew Doyle & Jacob Wong, 2013. "Wage Posting Without Full Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 231-252, April.
    13. Andrea Morescalchi, 2016. "The Puzzle Of Job Search And Housing Tenure: A Reconciliation Of Theory And Empirical Evidence," Journal of Regional Science, Wiley Blackwell, vol. 56(2), pages 288-312, March.
    14. Lester, Benjamin & Visschers, Ludo & Wolthoff, Ronald, 2015. "Dynamic Relational Contracts under Complete Information," SIRE Discussion Papers 2015-51, Scottish Institute for Research in Economics (SIRE).
    15. Geromichalos, Athanasios, 2012. "Directed search and optimal production," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2303-2331.
    16. Andrea Morescalchi, 2021. "A new career in a new town. Job search methods and regional mobility of unemployed workers," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 20(2), pages 223-272, May.
    17. Etienne Campens & Solenne Tanguy, 2006. "The market for job placement: a model of headhunters," Post-Print halshs-00113476, HAL.
    18. Michele Mosca & Francesco Pastore, 2009. "Wage Effects of Recruitment Methods: The Case of the Italian Social Service Sector," AIEL Series in Labour Economics, in: Marco Musella & Sergio Destefanis (ed.), Paid and Unpaid Labour in the Social Economy. An International Perspective, edition 1, chapter 8, pages 115-141, AIEL - Associazione Italiana Economisti del Lavoro.
    19. Benjamin Lester & Ludo Visschers & Ronald Wolthoff, 2014. "Competing with Asking Prices (first version)," Edinburgh School of Economics Discussion Paper Series 243, Edinburgh School of Economics, University of Edinburgh.
    20. Etienne Campens & Solenne Tanguy, 2005. "The market for job placement : a model of head-hunters," Cahiers de la Maison des Sciences Economiques v06027, Université Panthéon-Sorbonne (Paris 1).

    More about this item

    Keywords

    intermediation; public employment agency; labor search;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_5245. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.