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Understanding the Role of the Public Employment Agency

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  • Holzner, Christian
  • Watanabe, Makoto

Abstract

The Public Employment Agency (PEA) provides intermediation services in the labor market. We investigate the implications of having such an additional market place using a tractable search model. The intermediation services enable registered firms to pay lower wages compared to the private market. Paying lower wages leads to adverse selection. When deciding whether or not to register with the PEA firms have to trade off the negative selection of applicants coming through the PEA with the lower wages possible at the PEA. This explains why only a fraction of firms use the PEA as search channel although it is free of charge. Our model also suggests which job-types are more likely to be registered with the PEA. We test these theoretical predictions empirically using the German Job Vacancy Survey and the German Socio Economic Panel and find strong support for them.

Suggested Citation

  • Holzner, Christian & Watanabe, Makoto, 2018. "Understanding the Role of the Public Employment Agency," Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181499, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc18:181499
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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 A. Gautier & Bo Hu & Makoto Watanabe, 2016. "Marketmaking Middlemen," CESifo Working Paper Series 6030, CESifo Group Munich.
    3. 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.
    4. Pieter A. Gautier & Paul Muller & Bas van der Klaauw & Michael Rosholm & Michael Svarer, 2015. "Estimating Equilibrium Effects of Job Search Assistance," CESifo Working Paper Series 5476, CESifo Group Munich.
    5. Felix Ehrenfried & Christian Holzner, 2018. "Dynamics and Endogeneity of Firms' Recruitment Behaviour," CESifo Working Paper Series 7283, CESifo Group Munich.
    6. 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

    Keywords

    Intermediation; Public Employment Agency; Labor Search;

    JEL classification:

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

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