The Dilemma of Delegating Search: Budgeting in Public Employment Services

24 Pages Posted: 13 Sep 2010

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Martin Altemeyer-Bartscher

Chemnitz University of Technology (CUT)

Thomas Kuhn

Chemnitz University of Technology - Department of Economics and Business Administration

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

JEL Classification: J64, D82

Suggested Citation

Addison, John T. and Altemeyer-Bartscher, Martin and Kuhn, Thomas, The Dilemma of Delegating Search: Budgeting in Public Employment Services. IZA Discussion Paper No. 5170. Available at SSRN: https://ssrn.com/abstract=1675641

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States
803-777-7400 (Phone)
803-777-6876 (Fax)

HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Martin Altemeyer-Bartscher

Chemnitz University of Technology (CUT) ( email )

Chemnitz
Germany

Thomas Kuhn

Chemnitz University of Technology - Department of Economics and Business Administration ( email )

D-09107 Chemnitz
Germany
0049 (0) 371-531-4941 (Phone)
0049 (0) 371-531-4343 (Fax)

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