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Incentives and Regional Coordination in Employment Services

  • Arjen de Vetten
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    Due to yardstick competition, municipalities have financial incentives to reduce unemployment, but are not likely to cooperate with each other to have the scale advantages of a regional labour market. On the other hand, a regional public employment service, like the CWI in the Netherlands, has a higher probability and value of matching, but it lacks the incentives to exert the optimal mediation effort. This paper presents a game theoretical model that addresses the trade off between regional coordination and incentives in the mediation of unemployed in the Netherlands. The model is calibrated with information on vacancies and CWI clients for the Netherlands, in order to get an impression whether it is optimal to have a public employment service in the context of this model. Finally, various institutional settings, like a privatised employment service and a performance contract for the employment office, are considered.

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    Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Memorandum with number 190.

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    Date of creation: Oct 2007
    Date of revision:
    Handle: RePEc:cpb:memodm:190
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    3. Burda, Michael C. & Profit, Stefan, 1996. "Matching across space: Evidence on mobility in the Czech Republic," Labour Economics, Elsevier, vol. 3(3), pages 255-278, October.
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    13. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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    16. Ashenfelter, Orley & Ashmore, David & Deschenes, Olivier, 2000. "Do Unemployment Insurance Recipients Actively Seek Work? Evidence From Randomized Trials in Four U.S. States," IZA Discussion Papers 128, Institute for the Study of Labor (IZA).
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