Abstract
This paper studies whether the decentralization of public employment services (PES) increases job placements among the unemployed. Decentralizing PES has been a widely applied reform used by governments aiming to enhance their efficacy. However, economic theory is ambiguous about its effects, and empirical evidence has been scarce. Using a difference-in-differences design, we exploit unique within-country variation in decentralization provided by the partial devolution of German job centers in 2012. We find that decentralization reduces job placements by approximately 10%. Decentralized providers expand the use of active labor market programs and monitoring strategies which diminish job seekers’ reemployment prospects but shift costs to higher levels of government.
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