Does the Public Employment Service Affect Search Effort and Outcomes?

Denis Fougere (), Jacqueline Pradel () and Muriel Roger

No 7095, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper, we examine the disincentive effects of the public employment service on the search effort of unemployed workers and on their exit rate from unemployment. For that purpose, we specify a structural search model with fixed and variable costs of search in which unemployed workers select their optimal search intensity given the exogenous arrival rate of job contacts coming from the public employment agency. Because the theoretical effect of an increase in this exogenous job contact arrival rate on the structural exit rate from unemployment is ambiguous, we estimate this model using individual unemployment duration data. Our results show that the exit rate from unemployment increases with the arrival rate of job contacts obtained by the public employment service, especially for low-educated and ow-skilled workers. They also show that the search effort is more costly for low-educated women and low-skilled adult unemployed workers. This last result suggests that a public employment agency that matches searchers and employers is beneficial, in the sense that it saves searchers in terms of search costs they would otherwise bear.

Keywords: job search; public employment agency; search intensity; simulated maximum likelihood (search for similar items in EconPapers)
JEL-codes: C41 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab
Date: 2008-12
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