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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.

Suggested Citation

  • John T. Addison & Martin Altemeyer-Bartscher & Thomas Kuhn, 2011. "The Dilemma of Delegating Search: Budgeting in Public Employment Service," Professional Reports 02_11, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimpre:02_11
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    References listed on IDEAS

    as
    1. Abadir, Karim M. & Caggiano, Giovanni & Talmain, Gabriel, 2013. "Nelson–Plosser revisited: The ACF approach," Journal of Econometrics, Elsevier, vol. 175(1), pages 22-34.
    2. Karim Abadir & Gabriel Talmain, 2002. "Aggregation, Persistence and Volatility in a Macro Model," Review of Economic Studies, Oxford University Press, vol. 69(4), pages 749-779.
    3. Snir, Avichai & Levy, Daniel & Chen, Haipeng (Allan), 2017. "End of 9-endings, price recall, and price perceptions," Economics Letters, Elsevier, vol. 155(C), pages 157-163.
    4. L. Di Matteo & T. Barbiero, 2018. "Economic Growth and the Public Sector: A Comparison of Canada and Italy, 1870-2013," Working Paper series 18-08, Rimini Centre for Economic Analysis.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

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

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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