2014), “Private and Public Provision of Counseling to Job Seekers: Evidence from a Large Controlled Experiment

Abstract Contracting out public services to private firms has ambigous effects when quality is imperfectly observable. Using a randomized experiment over a national sample in France, we compare the efficiency of the public employment service (PES) vs. private providers in delivering very similar job-search intensive counseling. The impact of each program is assessed with respect to the standard, low intensity track offered by the PES to the unemployed. We find that both programs do increase exit rates to employment by 15 to 35%. But the impact of the public program is about twice as large as compared with the private program, at least during the 6 first months after random assignment. We argue that the contract structure with the private firms may not overcome the agency problem that arises when the unemployed recipient "quality" is difficult to observe. It is possible that profit maximizing companies have found it optimal to make minimum effort on the placement of job-seekers. * We would like to thank ANPE, Unédic and DARES for their involvement in the experiment from which the data are drawn, and for their financial support to the evaluation. We are grateful to Julien Guitard who contributed to the design and implementation of the experiment on the research side. We also thank Lucie Gadenne and Hélène Blake for research assistance