Should Local Public Employment Services be Merged with the Local Social Benefit Administrations?



distribution process. Further regional background variables like the degree of urbanisation
and the population size of a region are obtained from the Federal Statistical Office. Table A1
in the Appendix provides some summary statistics of the dataset used for the subsequent
analysis.

Since the status of being an Approved Local Provider and the organisational
characteristics do not change over time under investigation, we do not gain anything by
using the panel structure of the dependent variable. We therefore take the averages of the
monthly data for our OLS and IV regressions.

5. The overall effect of being an Approved Local Provider

The overall effect of being an Approved Local Provider is obtained by comparing the
performance of Approved Local Providers with the performance of Joint Local Agencies
without controlling for organisational characteristics.

Comparing the weighted averages of the job finding rates of long-term unemployed
(weighted by the number of long-term unemployed in the region) shows that the job finding
rate in regions with Approved Local Providers is higher than in regions with Joint Local
Agencies. On average 3.50 % of all long-term unemployed in regions with Joint Local
Agencies and 3.69 % in regions with Approved Local Providers found a job each month.
However, this difference can be driven by heterogeneity across regions. 62 out of 69
Approved Local Providers operate in rural regions, which generally have better labour
market conditions. If we restrict our sample to rural regions only, Joint Local Agencies with
a job finding rate of 3.89 % outperform Approved Local Providers with a rate of 3.70 %.

We further examine this relationship by controlling for observable regional
characteristics that influence the job finding probability of long-term unemployed by
estimating a standard regional matching function. The baseline estimation equation is given
by,

ln У г = β0 + β1 Ii + β2ln uit-1 + β3ln vit-1 + β4 ln unit1 + β5 ln vni,t1 + XY + fλ ,     (1)

where ln yi is the natural log of the average number of long-term unemployed finding a job
each month. The indicator variable
Ii takes a value of one if long-term unemployed are cared
for by an Approved Local Provider in region
i and a value of zero otherwise. According to
the standard matching function approach we also include the stocks of short- and long-term
unemployed workers searching for a job and the number of newly available vacancies. Since



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