Did the Introduction of Private Contractors Improve Turnover to Employment in the Swedish Labor Market?

Abstract

In Sweden, the new government that took office in 2006 gave the Public Employment Service instructions to introduce private contractors as a complement to publicly provided services. In this paper I use survival analysis in an intention-to-treat approach to compare time to employment of jobseekers in labor market areas that cooperated with private contractors with jobseekers in labor market areas that did not cooperate with private contractors, all within the program Job and Development Guarantee. I use register data from the Swedish Public Employment Service and exploit within region and period variation in a differences-in-differences approach. I find that the labor market areas that cooperated with private contractors had lower turnover to employment than labor market areas that did not cooperate with private contractors. The observed result could be due to different reasons. However, among other things, the contract agreement with private contractors was not optimally designed with a poor incentives structure. Moreover, the introduction of private contractors increased the administrative burden upon the staff of the Public Employment Service.