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Understanding the Role of the Public Employment Agency

Author

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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," VfS 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. Pieter Gautier & Bo Hu & Makoto Watanabe, 2023. "Marketmaking Middlemen," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 83-103, March.
    2. Makoto Watanabe, 2018. "Middle Men: The Visible Market-Makers," The Japanese Economic Review, Springer, vol. 69(2), pages 156-170, June.
    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. 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;
    All these keywords.

    JEL classification:

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

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