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The Employment Effect of Reforming a Public Employment Agency

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  • Andrey Launov

    (Department of Economics, Johannes Gutenberg-Universitaet Mainz, Germany; Department of Economics (IRES), Universite catholique de Louvain; CESifo, Center for Economic Studies)

  • Klaus Waelde

    (Department of Economics, Johannes Gutenberg-Universitaet Mainz; Department of Economics (IRES), Universite catholique de Louvain; CESifo, Center for Economic Studies)

Abstract

By how much does an increase in operating effectiveness of a public employment agency (PEA) and a reduction of unemployment benefits reduce unemployment? Using a recent labour market reform in Germany as background, we find that an enhanced effectiveness of the PEA explains about 20% of the observed post- reform unemployment decline. The role of unemployment benefit reduction ex- plains just about 5% of the observed decline. Due to disincentive effects resulting from the reform, the reform of the PEA could have had an even higher impact on unemployment reduction if there had been less focus on long-term unemployed workers.

Suggested Citation

  • Andrey Launov & Klaus Waelde, 2015. "The Employment Effect of Reforming a Public Employment Agency," Working Papers 1507, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 18 Aug 2015.
    • Handle: RePEc:jgu:wpaper:1507
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    More about this item

    Keywords

    Employment agencies; unemployment benefits; labour market reform; unemployment; structural model;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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