Evaluating partial employment service privatization in Sweden

I get regular emails from the IFAU (a labor market policy research institute) in Uppsala, Sweden about their new working papers.

Today this one arrived:

Effects of outsourcing employment services: evidence from a randomized experiment

Helge Bennmarker, Erik Grönqvist, Björn Öckert

In many countries welfare services that traditionally have been provided by the public sector are increasingly being contracted out to private providers. But are private contractors better at providing these services? We use a randomized experiment to empirically assess the effectiveness of contacting out employment services to private placement agencies. Our results show that unemployed at private placement agencies have a much closer interaction with their placement worker than unemployed at the Public Employment Service (PES). In particular, unemployed at private agencies receive more assistance in improving their job search technology. We do not find any overall difference in the probability of employment between private placement agencies and the PES), but this hides important heterogeneities across different types of unemployed. We find evidence that private providers are better at providing em¬ployment services to immigrants, and also indications that they may be worse for adolescents. Any effects tend to fade away over time.

What makes this cool?

First, it is a social experiment conducted in a developed country other than the United States. Those are rare birds indeed.

Second, it is an evaluation focused not on the question of whether or not a given service should be offered but rather on how best to organize its delivery. In particular, the evaluation examines privatization of employment service services. The opportunities for evaluations of this sort are nearly endless, and experiments that consider how to deliver services should raise fewer political issues than experiments that deny services to a control group in order to estimate the effect of services relative to no services.

Third, the evaluators here focus not just on the final product, namely labor market outcomes, but also on the process, by reporting on impacts on things like time spent the caseworker. This helps in understanding where the impacts on labor market outcomes come from.