The Dilemma of Delegating Search: Budgeting in Public Employment Services

John Addison, Martin Altemeyer-Bartscher and Thomas Kuhn ()
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Thomas Kuhn: Chemnitz University of Technology

No 5170, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The poor performance often attributed to many public employment services may be explained in part by a delegation problem between the central office and local job centers. In markets characterized by frictions, job centers function as match-makers, linking job seekers with relevant vacancies. Because their search intensity in contacting employers and collecting data is not verifiable by the central authority, a typical moral hazard problem can arise. To overcome the delegation problem and provide high-powered incentives for high levels of search effort on the part of job centers, we propose output-related schemes that assign greater staff capacity to agencies achieving high strike rates.

Keywords: matching unemployment; public employment service; delegation problem; moral hazard; search theory (search for similar items in EconPapers)
JEL-codes: D82 J64 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2010-09
New Economics Papers: this item is included in nep-cta, nep-lab and nep-ltv
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