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Effects of outsourcing employment services: evidence from a randomized experiment

In many countries welfare services that traditionally have been provided by the public sector are increasingly being contracted out to private providers. But are private contractors better at providing these services? We use a randomized experiment to empirically assess the effectiveness of contacting out employment services to private placement agencies. Our results show that unemployed at private placement agencies have a much closer interaction with their placement worker than unemployed at the Public Employment Service (PES). In particular, unemployed at private agencies receive more assistance in improving their job search technology. We do not find any overall difference in the probability of employment between private placement agencies and the PES), but this hides important heterogeneities across different types of unemployed. We find evidence that private providers are better at providing em¬ployment services to immigrants, and also indications that they may be worse for adolescents. Any effects tend to fade away over time.

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Paper provided by IFAU - Institute for Evaluation of Labour Market and Education Policy in its series Working Paper Series with number 2009:23.

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Length: 42 pages
Date of creation: 30 Nov 2009
Date of revision:
Publication status: Published as Bennmarker, Helge, Erik Grönqvist and Björn Öckert, 'Effects of outsourcing employment services: evidence from a randomized experiment' in Journal of Public Economics, 2013, pages 68-84.
Handle: RePEc:hhs:ifauwp:2009_023
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  1. Oliver Hart & John Moore, 1988. "Property Rights and the Nature of the Firm," Working papers 495, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, March.
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  4. Timothy Besley & Maitreesh Ghatak, 2005. "Competition and Incentives with Motivated Agents," American Economic Review, American Economic Association, vol. 95(3), pages 616-636, June.
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  8. Oliver Hart & Andrei Shleifer & Robert Vishny, 1996. "The Proper Scope of Government: Theory and an Application to Prisons," Harvard Institute of Economic Research Working Papers 1778, Harvard - Institute of Economic Research.
  9. Oliver Bruttel, 2005. "Are Employment Zones Successful? Evidence From the First Four Years," Local Economy, Taylor and Francis Journals, vol. 20(4), pages 389-403, November.
  10. Winterhager, Henrik & Heinze, Anja & Spermann, Alexander, 2006. "Deregulating job placement in Europe: A microeconometric evaluation of an innovative voucher scheme in Germany," Labour Economics, Elsevier, vol. 13(4), pages 505-517, August.
  11. Ochel, Wolfgang, 2007. "Contracting out Employment Services Involving Temporary Agency Work in Germany," MPRA Paper 13820, University Library of Munich, Germany.
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