Should Welfare Administration be Centralized or Decentralized? Evidence from a Policy Experiment

Bernhard Boockmann 1 , Thomas Walter 2 , Martin Huber 3 , Stephan L. Thomsen 4 , and Christian Göbel 5
  • 1 Institute for Applied Economic Research (IAW),, Tübingen, Germany
  • 2 Centre for European Economic Research (ZEW),, Mannheim, Germany
  • 3 University of St. Gallen,, St. Gallen, Switzerland
  • 4 Lower Saxony Institute for Economic Research (NIW),, Hannover, Germany
  • 5 University of Applied Labour Studies of the Federal Employment Agency,, Mannheim, Germany


The 2005 reform of the German welfare system introduced two competing organizational models for welfare administration. In most districts, a centralized organization was established where local welfare agencies are bound to central directives. At the same time, 69 districts were allowed to opt for a decentralized organization. We evaluate the relative success of both types in terms of integrating welfare recipients into employment. Compared to centralized organization, decentralized organization has a negative effect on employment chances of males. For women, no significant effect is found. These findings are robust to the inclusion of aspects of internal organization common to both types of agencies.

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