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Sign reversal in LIVE treatment effect estimates: The effect of vocational training on unemployment duration

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  • Eyal, Yonatan
  • Beenstock, Michael

Abstract

We use administrative records in Israel to identify the treatment effect of vocational training for the unemployed on the duration of unemployment. We randomize training using data on the availability of courses in and around the time of becoming unemployed. This assumes that the timing of entry into unemployment is random, and course availability around the time of entry is independent of current labor market conditions. According to naïve estimators, which ignore self-selectivity, training reduces unemployment durations. The same applies to linear (IV) estimators, which control for self-selectivity. However, the opposite is found when non-linear IV estimators are used, i.e. training prolongs unemployment durations. Sign reversal depends on how the first stage is specified. A non-nested test indicates that the nonlinear estimate of the treatment effect is preferable to its linear counterpart, in which case training prolongs unemployment spells.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 15 (2008)
Issue (Month): 5 (October)
Pages: 1102-1125

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Handle: RePEc:eee:labeco:v:15:y:2008:i:5:p:1102-1125

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

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  1. James J. Heckman & Sergio Urzua & Edward Vytlacil, 2009. "Understanding Instrumental Variables in Models with Essential Heterogeneity," Working Papers 200941, Geary Institute, University College Dublin.
  2. Alberto Abadie, 2000. "Semiparametric Estimation of Instrumental Variable Models for Causal Effects," NBER Technical Working Papers 0260, National Bureau of Economic Research, Inc.
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  8. Angrist, Joshua D, 2001. "Estimations of Limited Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," Journal of Business & Economic Statistics, American Statistical Association, vol. 19(1), pages 2-16, January.
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  13. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
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