1. Introduction
Getting the long-term unemployed back to work has been top on the agenda of many
European governments over the last two decades. More recently European governments
expressed their desire to additionally maintain a solid balance between social and economic
goals. The aim to simultaneously enhance both flexibility and security in the labour market
has led the European Commission together with the Member States to develop a set of
common principles for flexicurity. The principle to provide the long-term unemployed and
the inactive with the means necessary to find a job and to achieve an acceptable living
standard requires a higher degree of cooperation between local public employment services
and social benefit administrations. Different countries have adopted different strategies to
encourage the integration between local public employment services and social benefit
administrations. While some European countries have decentralised their public employment
services to increase the cooperation with social benefit administrations at the regional level,
others have merged public employment services and social benefit administrations
(European Commission, 2006). In 2002 the United Kingdom merged public employment
services and social benefit administrations (Jobcentre Plus). Finland started to integrate the
labour and the social affairs administrations into joint services (Duuri) in 2002 (Genova,
2008). In Denmark the 2007 reorganisation of local and regional governments included the
integration of public employment services and county-led social benefit administrations into
91 one-stop-shop jobcentres (Lindsay and McQuaid, 2008). Public employment services and
social benefit administrations were also merged in the Netherlands (Location for Work and
Income) and in France (France emploi) in 2009 (European Commission, 2009).
We use a policy experiment in Germany to evaluate whether merging public
employment services and social benefit administrations improves the job finding probability
of the long-term unemployed. The Hartz IV reform that came into effect in 2005 has created
new institutions for the long-term unemployed. Before the reform, Germany had two
separate institutions; the local social benefit administrations, which cared for social
assistance recipients, and the local public employment services, which cared for
unemployment assistance recipients. Within the Hartz IV reform the German federal
government allowed 69 out of 442 regions to be solely responsible for all long-term
unemployed (Approved Local Providers), while the remaining regions had to form Joint
Local Agencies by merging their local public employment services with their social benefit
administrations.
Since the Hartz IV reform created new institutions and defined new eligibility criteria
for long-term unemployment benefits, we are only able to compare the performance of Joint
Local Agencies with the performance of Approved Local Providers after the Hartz IV