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A New Approach to Estimate the Wage Returns to Work-Related Training

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Author Info

  • Leuven, Edwin

    ()
    (University of Oslo)

  • Oosterbeek, Hessel

    ()
    (University of Amsterdam)

Abstract

This paper proposes a new approach to identify the wage effects of training. The idea is to narrow down the comparison group by only taking into consideration the workers who wanted to participate in training but did not do so because of some random event. The point estimate of the return to training consistently drops when restricting the comparison group this way. While the OLS estimate of the return to training participation is significantly positive, this is no longer the case when we use the new comparison group. This outcome suggests that a large share of what is usually interpreted as returns to training is actually the return to some unobservable characteristic.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 526.

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Length: 22 pages
Date of creation: Jul 2002
Date of revision:
Publication status: published in: Journal of Applied Econometrics, 2008, 23, 423-434
Handle: RePEc:iza:izadps:dp526

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Keywords: treatment effect; returns to training;

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References

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  1. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  2. Edwin Leuven & Hessel Oosterbeek, 2002. "Evaluating the effect of tax deductions on training," Labor and Demography 0205001, EconWPA.
  3. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  4. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October.
  5. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
  6. Heckman, James J. & Lalonde, Robert J. & Smith, Jeffrey A., 1999. "The economics and econometrics of active labor market programs," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 31, pages 1865-2097 Elsevier.
  7. Greenhalgh, Christine & Stewart, Mark, 1987. "The Effects and Determinants of Training," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(2), pages 171-90, May.
  8. J.D. Angrist & Guido W. Imbens & D.B. Rubin, 1993. "Identification of Causal Effects Using Instrumental Variables," NBER Technical Working Papers 0136, National Bureau of Economic Research, Inc.
  9. John M. Barron & Mark C. Berger & Dan A. Black, 1997. "On-the-Job Training," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ojt.
  10. Booth, Alison L, 1993. "Private Sector Training and Graduate Earnings," The Review of Economics and Statistics, MIT Press, vol. 75(1), pages 164-70, February.
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Citations

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Cited by:
  1. Rita Asplund, 2005. "The Provision and Effects of Company Training: A Brief Review of the Literature," Nordic Journal of Political Economy, Nordic Journal of Political Economy, vol. 31, pages 47-73.
  2. Lutz Bellmann & Peter Ellguth, 2006. "Verbreitung von Betriebsräten und ihr Einfluss auf die betriebliche Weiterbildung," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(5), pages 487-504, September.
  3. Uschi Backes-Gellner & Johannes Mure & Simone Tuor, 2006. "The Puzzle of Non-Participation in Continuing Training – An Empirical Study of Permanent vs. Occasional Non-Participation," Working Papers 0058, University of Zurich, Institute for Strategy and Business Economics (ISU).
  4. Pfeifer, Christian & Janssen, Simon & Yang, Philip & Backes-Gellner, Uschi, 2011. "Effects of Training on Employee Suggestions and Promotions in an Internal Labor Market," IZA Discussion Papers 5671, Institute for the Study of Labor (IZA).
  5. Benoît Mahy & Mélanie Volral, 2010. "Firm Training and Labour Demand in Belgium: Do Productivity Dominate Cost Effects?," DULBEA Working Papers 10-08, ULB -- Universite Libre de Bruxelles.
  6. Grit Muehler & Michael Beckmann & Bernd Schauenberg, 2007. "The returns to continuous training in Germany: new evidence from propensity score matching estimators," Review of Managerial Science, Springer, vol. 1(3), pages 209-235, November.
  7. Asplund, Rita, 2004. "The Provision and Effects of Company Training. A brief review of the literature," Discussion Papers 907, The Research Institute of the Finnish Economy.
  8. Hendrik Jürges & Kerstin Schneider, 2005. "Dynamische Lohneffekte beruflicher Weiterbildung," MEA discussion paper series 05092, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  9. Anja Kuckulenz & Michael Maier, 2006. "Heterogeneous Returns to Training, An Analysis with German Data Using Local Instrumental Variables," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 226(1), pages 24-40, January.

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