Job placement vouchers may be interpreted as a further step to shift job placement to the private sector. The government launched this innovative instrument urging the former public placement monopolist to subsidize his private competitors. We exploit very rich administrative data provided for the first time by the Federal Employment Agency to apply propensity score matching as a method to solve the fundamental evaluation problem. We find positive treatment effects on the integration into employment between 3.7 percentage points in West Germany and 4.8 percentage points in East Germany and higher deadweight effects in East Germany than in West Germany. JEL Classification: J 68, H 25

Job placement vouchers may be interpreted as a further step to shift job placement to the private sector. The government launched this innovative instrument urging the former public placement monopolist to subsidize his private competitors. We exploit very rich administrative data provided for the first time by the Federal Employment Agency to apply propensity score matching as a method to solve the fundamental evaluation problem. We find positive treatment effects on the integration into employment between 3.7 percentage points in West Germany and 4.8 percentage points in East Germany and higher deadweight effects in East Germany than in West Germany. JEL Classification: J 68, H 25

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp06026.pdf Non-technical summaryContracting out of placement services was introduced in Germany in 2002 to make placement services for unemployed individuals more effective and efficient and thereby reduce frictional unemployment. In principle, a system of private providers can lead to better quality and cost efficiency in placement services by allowing flexibility and introducing competition as well as success based compensation. The government remains the financier and has management and policy control over the type and quality of services to be provided. On the basis of contracts between public job centers and private providers, public caseworkers choose unemployed individuals to send to the private providers who, in turn, try to match the individuals with suitable employment. The remuneration paid to the providers depends mainly on their success rate in placement.The empirical part of this paper analyzes the use of this instrument and its effectiveness from the perspective of the unemployed individuals assigned to a private provider for the complete placement activities, i.e. all the activities necessary to place him in a job. The selectivity of the assignments is taken into account in the microeconometric evaluation study that uses propensity score matching to solve the evaluation problem. The plausibility of the identifying conditional independence assumption is discussed. The highly informative administrative data provided by the Federal Employment Agency minimizes selection on unobservables, so the matched control group is a reliable proxy for the unobserved counterfactual. It is argued that unobserved heterogeneity is small enough to get a negligible bias.The estimated effect of the assignment to private providers on the probability of employment is small and negative: 2.3 to 2.6 percentage points after 2 months. The positive effects on the probability of unemployment are even bigger, up to 7 percentage points. The effects are only temporary, vanishing after some months. On average, the private providers were less successful in placing their clients than the public employment offices at the beginning of 2004. This might be explained by deficits in the contract management. The design of the tender allowed providers who combined low quality with a low price to be awarded the contracts. Information mechanisms did not seem to be effective and the incentive effect of the payment was rather small. The results show a positive rela...

In April 2002 German government introduced job placement vouchers as a new instrument of active labour market policy to foster the transition of unemployed to jobs. This paper investigates the demand, the treatment effect of the treated and the economic efficiency of job placement vouchers issued from May 2003 to June 2004. The analysis employs a large sample of unemployed individuals from administrative data collected by the German Federal Employment Agency. 20 percent of the West German and 37 percent of the East German unemployed demanded a voucher. According to the microeconometric results the treatment impact of the treated is positive. 5 out of 100 voucher recipients found a job as a result of the instrument. An additional analysis of the cost and returns of the voucher scheme reveals that the return remains positive if no more than 70 per cent of the direct effects are compensated by indirect (substitution) effects.

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