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The Dilemma of Delegating Search: Budgeting in Public Employment Services

Author

Listed:
  • Addison, John T.

    (Durham University Business School)

  • Altemeyer-Bartscher, Martin

    (Chemnitz University of Technology)

  • Kuhn, Thomas

    (Chemnitz University of Technology)

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.

Suggested Citation

  • Addison, John T. & Altemeyer-Bartscher, Martin & Kuhn, Thomas, 2010. "The Dilemma of Delegating Search: Budgeting in Public Employment Services," IZA Discussion Papers 5170, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5170
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    References listed on IDEAS

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    More about this item

    Keywords

    matching unemployment; public employment service; delegation problem; moral hazard; search theory;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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