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Understanding the Role of the Public Employment Agency


  • Christian Holzner

    (Ludwig Maximilian University of Munich, Germany)

  • Makoto Watanabe

    (VU University Amsterdam, the Netherlands)


Using a unique vacancy dataset, we find that the Public Employment Agency (PEA) distributes workers more evenly across vacancies than the private market. We investigate the implications of having such a market place by using a directed search model, where firms can search via the PEA or the private market. Lower coordination frictions reduce wage competition and enable registered firms to pay lower wages compared to the private market. This advantage has to be traded off against the negative selection of applicants coming through the PEA. We take these theoretical predictions to the data and find strong support for them.

Suggested Citation

  • Christian Holzner & Makoto Watanabe, 2016. "Understanding the Role of the Public Employment Agency," Tinbergen Institute Discussion Papers 16-041/VII, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20160041

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    Cited by:

    1. Gautier, Pieter A. & Hu, Bo & Watanabe, Makoto, 2016. "Marketmaking Middlemen," IZA Discussion Papers 10152, Institute of Labor Economics (IZA).
    2. Pieter Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2018. "Estimating Equilibrium Effects of Job Search Assistance," Journal of Labor Economics, University of Chicago Press, vol. 36(4), pages 1073-1125.
    3. Felix Ehrenfried & Christian Holzner, 2018. "Dynamics and Endogeneity of Firms' Recruitment Behaviour," CESifo Working Paper Series 7283, CESifo Group Munich.
    4. Ehrenfried, Felix & Holzner, Christian, 2019. "Dynamics and endogeneity of firms’ recruitment behaviour," Labour Economics, Elsevier, vol. 57(C), pages 63-84.

    More about this item


    Labor Search; Intermediation; Public Employment Agency;

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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