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Effects of contracting out employment services: Evidence from a randomized experiment

Author

Listed:
  • Bennmarker, Helge

    (Institute for Evaluation of Labour Market and Education Policy)

  • Grönqvist, Erik

    (Institute for Evaluation of Labour Market and Education Policy)

  • Öckert, Björn

    (Institute for Evaluation of Labour Market and Education Policy)

Abstract
In many countries welfare services that traditionally have been provided by the public sector are being contracted out to private providers. But are private contractors better at providing these services? We use a randomized experiment to empirically assess the effectiveness of contracting out employment services to private placement agencies. Our results show that unemployed at private placement agencies have a closer interaction with their case worker than unemployed at the Public Employment Service (PES); e.g., they receive more assistance in improving their job search technology. We do not find any overall difference in the chances of finding employment between private placement agencies and the PES, but this hides important heterogeneities across different types of unemployed. In particular, private providers are better at providing employment services to immigrants, whereas they may be worse for adolescents. Any effects tend to fade away over time.

Suggested Citation

  • Bennmarker, Helge & Grönqvist, Erik & Öckert, Björn, 2012. "Effects of contracting out employment services: Evidence from a randomized experiment," Working Paper Series 2012:19, Uppsala University, Department of Economics.
    • Handle: RePEc:hhs:uunewp:2012_019
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    References listed on IDEAS

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    Cited by:

    1. Tomasz Gajderowicz & Maciej Jakubowski, 2019. "What works for disadvantaged unemployed: Private or public ALMP services? Evidence from (unplanned) RCT in Poland," Working Papers 2019-04, Faculty of Economic Sciences, University of Warsaw.
    2. Briscese, Guglielmo & Leibbrandt, Andreas, 2022. "Designing the market for job vacancies: A trust experiment with employment centers staff," Labour Economics, Elsevier, vol. 78(C).
    3. Michèle Belot & Philipp Kircher & Paul Muller, 2019. "Providing Advice to Jobseekers at Low Cost: An Experimental Study on Online Advice," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 86(4), pages 1411-1447.
    4. Knutsson, Daniel & Tyrefors, Björn, 2020. "The Quality and Efficiency Between Public and Private Firms: Evidence from Ambulance Services," Working Paper Series 1365, Research Institute of Industrial Economics, revised 01 Jul 2021.
    5. Cockx, Bart & Baert, Stijn, 2015. "Contracting Out Mandatory Counselling and Training for Long-Term Unemployed: Private For-Profit or Non-Profit, or Keep It Public?," IZA Discussion Papers 9459, Institute of Labor Economics (IZA).
    6. Danula K. Gamage & Pedro S. Martins, 2018. "Evaluating Public-Private Partnerships in Employment Services: The Case of the UK Work Programme," Working Papers 87, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    7. Marta C. Lopes, 2022. "A review on the elasticity of unemployment duration to the potential duration of unemployment benefits," Journal of Economic Surveys, Wiley Blackwell, vol. 36(4), pages 1212-1224, September.
    8. Lalive, Rafael & Cottier, Lionel & Flueckiger, Yves & Kempeneers, Pierre, 2018. "Does Job Search Assistance Really Raise Employment?," CEPR Discussion Papers 13133, C.E.P.R. Discussion Papers.
    9. Peters, Jörg & Langbein, Jörg & Roberts, Gareth, 2016. "Policy evaluation, randomized controlled trials, and external validity—A systematic review," Economics Letters, Elsevier, vol. 147(C), pages 51-54.
    10. Kim, Jinyoung & Kim, Seonghoon & Koh, Kanghyock, 2022. "Labor market institutions and the incidence of payroll taxation," Journal of Public Economics, Elsevier, vol. 209(C).
    11. Mergele, Lukas & Weber, Michael, 2020. "Public employment services under decentralization: Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 182(C).
    12. Gesine Stephan, 2016. "Public or private job placement services—Are private ones more effective?," IZA World of Labor, Institute of Labor Economics (IZA), pages 285-285, August.
    13. Adam Ayaita & Christian Grund & Lisa Pütz, 2022. "Job Placement via Private vs. Public Employment Agencies: Investigating Selection Effects and Job Match Quality in Germany," Schmalenbach Journal of Business Research, Springer, vol. 74(2), pages 137-162, June.
    14. Tomasz Gajderowicz & Maciej Jakubowski, 2019. "What Works for Disadvantaged Unemployed: Private or Public ALMP Services? Evidence from Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 332-346.
    15. 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.
    16. Rehwald, Kai & Rosholm, Michael & Svarer, Michael, 2015. "Are Public or Private Providers of Employment Services More Effective? Evidence from a Randomized Experiment," IZA Discussion Papers 9365, Institute of Labor Economics (IZA).
    17. Mergele, Lukas & Weber, Michael, 2020. "Public employment services under decentralization: Evidence from a natural experiment," Journal of Public Economics, Elsevier, vol. 182(C).
    18. Fredrik Andersson & Henrik Jordahl & Jens Josephson, 2019. "Outsourcing Public Services: Contractibility, Cost, and Quality," CESifo Economic Studies, CESifo Group, vol. 65(4), pages 349-372.
    19. Bennmarker, Helge & Grönqvist, Erik & Öckert, Björn, 2013. "Effects of contracting out employment services: Evidence from a randomized experiment," Journal of Public Economics, Elsevier, vol. 98(C), pages 68-84.
    20. Rehwald, Kai & Rosholm, Michael & Svarer, Michael, 2017. "Do public or private providers of employment services matter for employment? Evidence from a randomized experiment," Labour Economics, Elsevier, vol. 45(C), pages 169-187.
    21. Tatiana-Camelia DOGARU, 2014. "Contracting Out The Pensions System In Romania," Management and Marketing Journal, University of Craiova, Faculty of Economics and Business Administration, vol. 0(1), pages 91-102, May.
    22. Lionel Cottier & Yves Flückiger & Pierre Kempeneers & Rafael Lalive, 2024. "Employment Effects of Job Search Assistance for the Long-Term Unemployed," AEA Papers and Proceedings, American Economic Association, vol. 114, pages 577-581, May.
    23. Sørensen, Kenneth Lykke, 2016. "Heterogeneous impacts on earnings from an early effort in labor market programs," Labour Economics, Elsevier, vol. 41(C), pages 266-279.
    24. Julia Bock-Schappelwein & Andrea Egger-Subotitsch & Michael Flotzinger & Gabriele Schmied, 2021. "Vermittlungsaktivitäten der PES in Zeiten von COVID-19," WIFO Studies, WIFO, number 71447, April.

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    More about this item

    Keywords

    Job placement; Contracting out; Randomized experiment;
    All these keywords.

    JEL classification:

    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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