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Estimating the Returns to Community College Schooling for Displaced Workers

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Author Info
Jacobson, Louis (Westat Inc.)
LaLonde, Robert () (University of Chicago, NBER and IZA Bonn)
Sullivan, Daniel G. (Federal Reserve Bank of Chicago)

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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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1017.

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Length: 47 pages
Date of creation: Feb 2004
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Handle: RePEc:iza:izadps:dp1017

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Related research
Keywords: unemployment; training; schooling; evaluation;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Heckman, J.J. & Hotz, V.J., 1988. "Choosing Among Alternative Nonexperimental Methods For Estimating The Impact Of Social Programs: The Case Of Manpower Training," University of Chicago - Economics Research Center 88-12, Chicago - Economics Research Center.
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  2. 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. [Downloadable!] (restricted)
  3. 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.
  4. Ruhm, Christopher J, 1991. "Are Workers Permanently Scarred by Job Displacements?," American Economic Review, American Economic Association, vol. 81(1), pages 319-24, March. [Downloadable!] (restricted)
  5. 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.. [Downloadable!]
  6. Kletzer, Lori G, 1998. "Job Displacement," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 115-36, Winter. [Downloadable!] (restricted)
  7. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267. [Downloadable!] (restricted)
  8. repec:fth:prinin:382 is not listed on IDEAS
  9. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March. [Downloadable!] (restricted)
  10. Bruce C. Fallick, 1996. "A review of the recent empirical literature on displaced workers," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 50(1), pages 5-16, October.
  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. [Downloadable!] (restricted)
  12. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September. [Downloadable!] (restricted)
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  13. 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(1997-1), pages 55-142. [Downloadable!]
  14. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February. [Downloadable!] (restricted)
  15. 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. [Downloadable!] (restricted)
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  16. Bruce C. Fallick, 1995. "A review of the recent empirical literature on displaced workers," Finance and Economics Discussion Series 95-14, Board of Governors of the Federal Reserve System (U.S.).
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Cited by:
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  1. J. David Brown & John S. Earle & Almos Telegdy, 2005. "The Productivity Effects of Privatization: Longitudinal Estimates from Hungary, Romania, Russia, and Ukraine," Staff Working Papers 05-121, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
    Other versions:
  2. Peter R. Mueser & Kyung-Seong Jeon & Andrew Dyke & Carolyn J. Heinrich & Kenneth R. Troske, 2006. "The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes," Working Papers 0602, Department of Economics, University of Missouri. [Downloadable!]
    Other versions:
  3. Yolanda K. Kodrzycki, 2007. "Using unexpected recalls to examine the long-term earnings effects of job displacement," Working Papers 07-2, Federal Reserve Bank of Boston. [Downloadable!]
  4. J. David Brown & John Earle & Almos Telegdy, 2005. "Does Privatization Hurt Workers? Lessons from Comprehensive Manufacturing Firm Panel Data in Hungary, Romania, Russia, and Ukraine," CERT Discussion Papers 0509, Centre for Economic Reform and Transformation, Heriot Watt University. [Downloadable!]
    Other versions:
  5. Lechner, Michael & Wunsch, Conny, 2006. "Are Training Programs More Effective When Unemployment Is High?," CEPR Discussion Papers 5920, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. John S. Earle & Almos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials with LEED from Hungary, 1986–2003," Staff Working Papers 07-134, W.E. Upjohn Institute for Employment Research. [Downloadable!] (restricted)
  7. Lechner, Michael & Miquel, Ruth & Wunsch, Conny, 2005. "The curse and blessing of training the unemployed in a changing economy : the case of East Germany after unification," IAB Discussion Paper 200514, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
    Other versions:
  8. Yan Shen & Greg Weeks & Cheng Hsiao & Boqing Wang, 2007. "Evaluating the impacts of Washington state repeated job search services on the earnings of prime-age female TANF recipients," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 453-475. [Downloadable!]
  9. John S. Earle & Álmos Telegdy, 2007. "Ownership and Wages: Estimating Public-Private and Foreign-Domestic Differentials Using LEED from Hungary, 1986-2003," IZA Discussion Papers 3125, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Blomquist, Glenn C. & Coomes, Paul A. & Jepsen, Christopher & Koford, Brandon C. & Troske, Kenneth, 2009. "Estimating the Social Value of Higher Education: Willingness to Pay for Community and Technical Colleges," IZA Discussion Papers 4086, Institute for the Study of Labor (IZA). [Downloadable!]
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