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Labor Market Equilibrium with Public Employment Agency

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  • Christian Holzner
  • Makoto Watanabe

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, and explain why only a fraction of firms use the PEA as search channel despite its free service. We highlight the registering firms’ tradeoff between the negative selection of applicants and the lower wages possible at the PEA. Our theory also explains which job-types are more likely to be registered. 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

  • Christian Holzner & Makoto Watanabe, 2015. "Labor Market Equilibrium with Public Employment Agency," CESifo Working Paper Series 5245, CESifo.
    • Handle: RePEc:ces:ceswps:_5245
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    References listed on IDEAS

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    Cited by:

    1. Michael Weber, 2016. "The short-run and long-run effects of decentralizing public employment services," ifo Working Paper Series 209, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

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    More about this item

    Keywords

    intermediation; public employment agency; labor search;
    All these keywords.

    JEL classification:

    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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