Private providers in active labor market policy: effects and mechanisms

Research problemsGetting the unemployed back to work is a key challenge for societies around the world.

Traditionally, public authorities have provided the support, but recently private provision of employment services has become more common. Still, the existing evidence for contracting out employment services remains scarce. Private provision of employment services is also at the heart of major Swedish reform.

Due to a novel implementation design, we have a unique opportunity to evaluate the merits of such a major shift in the national policy for the provision of public employment services.

Besides investigating the long-standing question of private versus public provision, we will provide state-of-the-art contributions regarding the design of the compensation scheme and study the impact of private provision for different groups of job seekers.

We will also explore potential mechanisms in terms of service content in depth.Data and methodsKey to the research design for evaluating the merits of private provision of employment services is a randomized control trial integrated in the new Swedish private provider program.

The compensation to providers is differentiated in three tracks by distance to the labor market and we can exploit randomization along several dimensions.

The first part of this project exploits the randomization to study the overall effects of private provision, and the second part uses the randomization to study impacts of the compensation scheme for the private providers.

In the third part of the project, we conduct a job seeker survey to study what factors determine the choice of provider, what kind of support participants get, and how they perceive this support.Plan for project realisationThe project relies on administrative and survey data, and we will use conventional statistical and econometric methods.

The main part of the budget will fund the research group, consisting of researchers and a PhD student at IFAU.

The researchers have high competence and experience in econometrics and in analysing micro data.RelevanceThe private provider reform is one of the largest labor markers reforms in Sweden in recent years.

Our project should provide scientific evidence that can help to guide public policy, both for the choice between public and private providers, and for designing better private provider systems.