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Estimating the returns to community college schooling for displaced workers

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  • Jacobson, Louis
  • LaLonde, Robert
  • G. Sullivan, Daniel

Abstract

Studies show that high-tenure displaced workers typically incur substantial long-term earnings losses. As these losses have become increasingly apparent, policy makers have significantly expanded resources for retraining, much of which takes place in regular community college classes. To analyze the effectiveness of such training, we link administrative earnings records with the community college transcript records of workers displaced from jobs during the first half of the 1990s in Washington State. We explore several issues of statistical specification for regression models quantifying the impact of community college credits on earnings. These include (i) how to allow for a transition period immediately after the end of workers’ schooling when their earnings may be temporarily depressed, (ii) whether earnings gains are strictly proportional to credits earned, and (iii) how to model worker-specific unobserved heterogeneity. In our preferred specification, we find that the equivalent of an academic year of community college schooling raises the long-term earnings of displaced workers by an average of about 9 percent for men and about 13 percent for women. However, these average returns mask substantial variation in the returns associated with different types of courses. On the one hand, we estimate that an academic year of more technically oriented vocational and academic math and science courses raise earnings by about 14 percent for men and 29 percent for women. On the other hand, we estimate that less technically oriented courses yield very low and possibly zero returns. About one third of the increase in earnings associated with more technically oriented vocational and academic math and science courses is estimated to be due to increases in wage rates, with the remainder attributable to increased hours of work.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Econometrics.

Volume (Year): 125 (2005)
Issue (Month): 1-2 ()
Pages: 271-304

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Handle: RePEc:eee:econom:v:125:y:2005:i:1-2:p:271-304

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Web page: http://www.elsevier.com/locate/jeconom

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  1. Ashenfelter, Orley & Card, David, 1985. "Using the Longitudinal Structure of Earnings to Estimate the Effect of Training Programs," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 648-60, November.
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  3. Henry S. Farber, 1997. "The Changing Face of Job Loss in the United States, 1981-1995," Working Papers 761, Princeton University, Department of Economics, Industrial Relations Section..
  4. Kane, Thomas J & Rouse, Cecilia Elena, 1995. "Labor-Market Returns to Two- and Four-Year College," American Economic Review, American Economic Association, vol. 85(3), pages 600-614, June.
  5. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
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  8. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
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  11. Thomas J. Kane & Cecilia Elena Rouse, 1999. "The Community College: Educating Students at the Margin between College and Work," Journal of Economic Perspectives, American Economic Association, vol. 13(1), pages 63-84, Winter.
  12. James J. Heckman, 1989. "Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training," NBER Working Papers 2861, National Bureau of Economic Research, Inc.
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  14. Howard S. Bloom, 1984. "Estimating the Effect of Job-Training Programs, Using Longitudinal Data: Ashenfelter's Findings Reconsidered," Journal of Human Resources, University of Wisconsin Press, vol. 19(4), pages 544-556.
  15. Robert J. LaLonde, 2003. "Employment and Training Programs," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 517-586 National Bureau of Economic Research, Inc.
  16. Henry S. Farber, 1997. "The Changing face of Job Loss in the United States, 1981-1995," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1997 Micr), pages 55-142.
  17. Angrist, Joshua D & Newey, Whitney K, 1991. "Over-Identification Tests in Earnings Functions with Fixed Effects," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 317-23, July.
  18. Freeman, Richard B, 1974. "Occupational Training in Proprietary Schools and Technical Institutes," The Review of Economics and Statistics, MIT Press, vol. 56(3), pages 310-18, August.
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