Principal investigator: Bruno Benevit
Authors: Alberto Abadie, Joshua Angrist and Guido Imbens
Location of the Intervention: United States
Sample Size: Adult 11,204
Sector: Job market
Primary Variable of Interest: Income
Type of Intervention: Training
Methodology: OLS, Quantile Regression, 2SLS, and IV (QTE)
Summary
Competitive inequality in the labor market was a topic of great interest in the US in the late 80s, raising concerns among policymakers. Identifying the adoption and effects of these policies on different population groups is fundamental, as it provides input for their improvement. In this sense, the objective of this article was to estimate the effect of the training program of Job Training Partnership Act (JTPA) on the income of its participants, verifying such effects in different ranges (quantiles) of this outcome variable. Through the methods of OLS, Quantile Regression, 2SLS and IV-QTE, the authors demonstrated that the JTPA program positively affected the income of its participants in a heterogeneous way in relation to sex and income level.
- Policy Problem
The distributive consequences of implementing subsidized training programs are a topic of great importance for analyzing the welfare outcomes of these programs. Training policies in the United States (USA) have aimed to mitigate the competitive inequality present in its workforce. According to LaLonde (1995), this type of inequality is often associated with factors such as school dropout, prolonged unemployment, physical or mental disability, low proficiency in the native language, and a history of incarceration.
Through its Title II component, the JTPA program advocated focusing on participants within the profile associated with these factors. Therefore, identifying the profile of those most affected and likely to accept the program is essential for its effective implementation and evaluation.
- Implementation and Evaluation Context
Identifying the effects of policies on different population groups is fundamental to their formulation and improvement, and was the focus of analysis in several studies during the 90s, encompassing programs in the areas of education (LaLonde, 1995), union affiliation (Card, 1996), and minimum wages (DiNardo). et al..
The JTPA program was created amidst growing concern among public entities during the 80s and 90s regarding the deskilling of the workforce in the US and the increase in poverty rates observed in the country (LaLonde, 1995). The Title II component of the JTPA provided training services to selected individuals, with the possibility of joining (compliance and confidentiality) or non-adherence (noncompliance) to the program.
Title II of the JTPA included a National JTPA Study, providing data from its participants in 16 Service Delivery Areas (Service Delivery Areas – SDAs). These sites were selected non-randomly, chosen for their diversity, willingness and capacity to implement the experimental project, and for the size and composition of the experimental sample they could provide. The article used the database from this evaluation to identify heterogeneities in the estimates of the effects of JTPA training for different income brackets (quantiles), and also to verify the profile of the participants who joined the program.
- Policy/Program Details
The JTPA began in October 1983 and was the U.S. federal law that regulated the funding of federal training programs until the late 1990s. The main component of the JTPA was Title II, responsible for training the economically disadvantaged. Title II programs served approximately 1 million participants per year in the early 90s, at an annual cost of approximately $1,6 billion. JTPA services were provided at SDAs, distributed across 649 locations throughout the U.S.
The program offered training services through community colleges, state employment services, community organizations, and private sector training agencies. The services comprised: (i) occupational skills training, basic education, or both; (ii) on-the-job training and/or job search assistance; (iii) other services which may have included probationary employment and/or a combination of services (i) and (ii).
Title II applicants were typically considered eligible for training if they faced any “barriers to employment.” Such barriers included prolonged use of social assistance, dropping out of high school, 15 or more recent weeks of unemployment, limited English proficiency, physical or mental disability, reading proficiency below the 7th grade level, and/or a criminal record. Applicants were classified into one of five groups: adult men, adult women, young females, non-detained young males, and detained young males. Of those selected, approximately 60% chose to participate in the program.compliers).
- Method
The original National JTPA Study database contained 15.981 individuals. This database has ongoing income data for at least 30 months after program participation. This article focuses on groups of adult men and women with available 30-month income data after participation, consisting of two samples: one of 6.102 women and another of 5.102 men. The evaluation samples include applicants who enrolled between November 1987 and September 1989.
Although the selection of SDAs in the sample was not random, candidates were randomly selected for JTPA treatment, where 60% of those selected participated in the program. Individuals who did not receive treatment were generally excluded from JTPA services for 18 months (although they could participate in other programs). The sample data were artificially balanced to maintain a treatment control ratio of 2/1 at each site due to distinct selection probabilities arising from the SDAs' location. Treatment is indicated by a binary bariable that identifies participation in the treatment (compliance and confidentialityThe instrumental variable is a binary variable that indicates whether participants received the random offer of training. The outcome variable defined for the evaluation consists of the sum of earnings over a 30-month period, representing a precise measure of the program's lasting economic impact on participants' income. The covariate vector consists of demographic, occupational, and other information collected before randomization.
The first analysis consists of applying the ordinary least squares method (Ordinary Least Squares – OLS) and quantile regression to present a comparison of income distribution between participants and non-participants. The results of both methods do not necessarily represent a causal relationship. The second analysis employs two-stage least squares methods (Two-Stage Least Squares – 2SLS) and quantile treatment effect (Quantile Treatment Effect – QTE). Unlike the quantile regression method, the QTE method is not limited by the assumption of exogenous treatment selection. The QTE method corrects for the potential selection bias in quantile regression by more precisely identifying the group of adherents to the intervention (complierseven in the absence of an observable counterfactual.
Both quantile regression and QTE methods allow for the establishment of estimates of the outcome variable by conditioning the analysis to specific quantiles (points established along the cumulative distribution function of a random variable). In this study, five quantiles were used: (i) two below the median (15% and 25%), (ii) the median (50%), and (iii) two above the median (75% and 85%). Finally, the study presents estimates of the marginal distribution of the outcome variable for individuals in the absence of treatment.
- Main results
The results obtained through OLS estimations indicate that training increased earnings in the 30 months following the intervention by approximately the same amount for both men and women. The results of the quantile regression estimates show that the results for quantiles below the median are much higher than those above the median, with these differences being more evident for men than for women.
The results of the second analysis show similar effects between the 2SLS and QTE estimation for the median quantile, although the 2SLS estimator indicates greater precision. The training effect with the QTE estimator is substantially smaller in percentage and absolute magnitude compared to the results of the quantile regressions. Additionally, no significant effects were identified for men in the quantiles below the median. Unlike the results for men, the QTE estimates for women showed a significant effect for all quantiles analyzed, evidencing higher proportional effects in quantiles below the median.
The result found in the marginal distribution of income of individuals in the absence of treatment indicates a large discrepancy between the income of the counterfactual group of those who participated in the training and the control group. This suggests that the absence of effect in the quantiles below the median may be associated with a selection bias, indicating that the program was not able to effectively select economically disadvantaged men.
- Lessons in Public Policy
This article analyzed the impact of subsidized training services offered by the JTPA program on the income of its participants. Through quantile methodologies, the results demonstrated that participants experienced an increase in their income after joining the program. Women showed increased income at various income levels in the sample, with greater gains observed at the lower levels of the distribution. The results for men show that the policy only affected men with higher income levels in the distribution.
This evidence suggests that the JTPA was able to increase the income of women who participated in the services offered. Considering the objective of reducing inequalities in competitiveness, the program design does not appear to be efficient in making men with lower earning potential want to participate in the training services.
References
Card, D. (1996), “The Effect of Unions on the Structure of Wages: A Longitudinal Analysis”, Econometrics, Vol. 64 No. 4, p. 957.
DiNardo, J., Fortin, N.M. and Lemieux, T. (1996), “Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach”, Econometrics, Vol. 64 No. 5, p. 1001.
LaLonde, R.J. (1995), “The Promise of Public Sector-Sponsored Training Programs”, Journal of Economic Perspectives, Vol. 9 No. 2, pp. 149–168.
