June 2020

IZA DP No. 13399: (In)Efficiency of Employment Offices: A Study on Welfare Benefits Determination – Is There a Trade-off between Time Saving Case Management and Quality of Decisions?

Katharina Dyballa, Kornelius Kraft

This study investigates the efficiency of the process of benefit determination for welfare recipients in Germany. A stochastic frontier analysis is used to compute (in)efficiency of Jobcenter (employment offices) in terms of average processing time used for determining benefit levels per case. Next, the quality of the process of welfare benefits determination is considered by analyzing the share of upheld opposition because of misapplication of the laws. No effect of the (in)efficiency term on quality is estimated such that the quality of decision is unrelated to the time input. Manning of the employment offices seems to be to a large extent determined by other factors than a fair allocation of scarce resources in relation to demand for them. However in the case of treatment of one particular group (newly registered unemployed) and one organizational measure (offices that arrange specific appointments) a trade-off is estimated. Moreover, better skilled employees need less time for servicing cases and produce less erroneous decision.