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A General Equilibrium Evaluation of the Employment Service

Author

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  • Miana Plesca

    () (Department of Economics, University of Guelph; The Rimini Centre for Economic Analysis (RCEA))

Abstract

This paper provides a general equilibrium evaluation of the Employment Service, also known as the Public Labor Exchange (PLX), a national program which facilitates meetings between job seekers and vacancies. The paper departs from the partial equilibrium framework of previous evaluations by constructing a dynamic general equilibrium matching model with the PLX as one search channel, and the other search channel comprising all other search methods. The PLX is a directed search channel in the sense that searchers are matched by skill levels. The model is calibrated to the U.S. PLX and to the U.S. labor market and is used to compute general and partial equilibrium impacts of the PLX. The findings are that (i) the partial equilibrium impacts are consistent with the empirical literature, but different from the general equilibrium ones; (ii) the standard assumption in the evaluation literature, that outcomes for agents who do not participate in a program are not directly affected by the program, does not hold for the PLX; (iii) the heterogeneity across and within worker skill levels plays an important role when computing aggregate impacts; and, (iv) equilibrium adjustments are driven by employers who post are high-skill vacancies when both search channels operate.

Suggested Citation

  • Miana Plesca, 2010. "A General Equilibrium Evaluation of the Employment Service," Working Paper series 40_10, Rimini Centre for Economic Analysis.
  • Handle: RePEc:rim:rimwps:40_10
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    References listed on IDEAS

    as
    1. 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.
    2. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," Working Papers 1012, Queen's University, Department of Economics.
    3. repec:wop:calsdi:97-23 is not listed on IDEAS
    4. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
    5. John T. Addison & Pedro Portugal, 2002. "Job search methods and outcomes," Oxford Economic Papers, Oxford University Press, vol. 54(3), pages 505-533, July.
    6. Francisco M. Gonzalez & Shouyong Shi, 2010. "An Equilibrium Theory of Learning, Search, and Wages," Econometrica, Econometric Society, vol. 78(2), pages 509-537, March.
    7. van Ours, J C & Ridder, G, 1993. "Vacancy Durations: Search or Selection?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(2), pages 187-198, May.
    8. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
    9. Richard Blundell & Monica Costa Dias & Costas Meghir & John Van Reenen, 2004. "Evaluating the Employment Impact of a Mandatory Job Search Program," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 569-606, June.
    10. Shouyong Shi, 2002. "A Directed Search Model of Inequality with Heterogeneous Skills and Skill-Biased Technology," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 467-491.
    11. Roper, Stephen, 1988. "Recruitment Methods and Vacancy Duration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 35(1), pages 51-64, February.
    12. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
    13. Lindeboom, Maarten & van Ours, Jan C & Renes, Gusta, 1994. "Matching Employers and Workers: An Empirical Analysis on the Effectiveness of Search," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 45-67, January.
    14. Isaac Ehrlich & Kevin M. Murphy, 2007. "Why Does Human Capital Need a Journal?," Journal of Human Capital, University of Chicago Press, vol. 1(1), pages 1-7.
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    Citations

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    Cited by:

    1. 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.
    2. James Albrecht & Gerard van den Berg & Susan Vroman, 2009. "The Aggregate Labor Market Effects of the Swedish Knowledge Lift Program," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(1), pages 129-146, January.
    3. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2015. "Evaluating search and matching models using experimental data," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-35, December.
    4. Mathieu Bunel & Elisabeth Tovar, 2015. "Spatial Mismatch through Local Public Employment Agencies? Answers from a French Quasi-Experiment," EconomiX Working Papers 2015-32, University of Paris Nanterre, EconomiX.
    5. Launov, Andrey & Wälde, Klaus, 2016. "The employment effect of reforming a public employment agency," European Economic Review, Elsevier, vol. 84(C), pages 140-164.
    6. Chassamboulli Andri, 2011. "Cyclical Upgrading of Labor and Employment Differences across Skill Groups," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-42, May.
    7. Launov, Andrey & Wälde, Klaus, 2014. "Thumbscrews for Agencies or Individuals? How to reduce unemployment," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100558, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Search Models; Program Evaluation; Public Employment Service; PLX; General Equilibrium Impacts; Partial Equilibrium Impacts;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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