platform to exchange their experience on certain issues. For the validity of our instrument it
is important to note that the platforms where counties could discuss their experience in
caring for long-term unemployed were open to all counties. Furthermore, it is worth noting
that the German County Association has no financial means to influence local public policy
directly via subsidies or alike. Thus, the German County Association could only influence
the local labour market policy indirectly through the provision of information. For the
validity of our instrument it is important that this information was made available to all
regions irrespective of whether they cared for long-term unemployed in an Approved Local
Provider or a Joint Local Agency institution.
The German County Association feared that the municipalities and counties in charge of
the local social benefit administration would lose political influence if they gave up the
important task of caring for the long-term unemployed by merging with the local public
employment services that are accountable to the Federal Employment Agency. It therefore
campaigned for giving municipalities and counties the sole responsibility for the care of the
long-term unemployed, i.e. they campaigned for having the Approved Local Provider
institutions implemented nationwide. Given the enormous task of caring for all long-term
unemployed and the political responsibilities associated with such a challenge, not all local
authorities shared the view of the German County Association that it is preferable to be
solely responsible for long-term unemployed. Especially the mayors on the board of the
German County Association and those who were State presidents of the German County
Association pushed their regions to apply. Eight out of nineteen regions where a mayor was
a board member or a federal state president of the German County Association applied to
become an Approved Local Provider. As shown by the first stage regression in Table A4 in
the Appendix, the information whether the mayor of a region was a board member of the
German County Association or a State president in 2004 is a good predictor to explain which
regions chose to apply to become Approved Local Providers. The coefficient of German
County Association variable is positive and highly significant in the first stage regression
suggesting that a region whose mayor was a board member or a federal state president of the
German County Association was more likely to become an Approved Local Provider than
others. The F-statistics for the significance of the German County Association indicator
variable in the first-stage regression are between 24.00 and 29.74 for the different
specification used throughout this paper (see Table A3 in the Appendix). The F-statistics,
therefore, support the hypothesis that the mayors on the board of the German County
Association had a huge influence on whether a region applied for becoming an Approved
Local Provider.
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