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Is the Threat of Training More Effective than Training Itself? Experimental Evidence from the UI System

  • Jeffrey Smith

    (University of Western Ontario)

This paper examines the effect of the Worker Profiling and Reemployment Services (WPRS) system. This program "profiles" UI claimants to determine their probability of benefit exhaustion (or expected spell duration) and then provides mandatory employment and training services to claimants with high predicted probabilities (or long expected spells). Using a unique experimental design, we estimate that the WPRS program reduces mean weeks of UI benefit receipt by about 2.2 weeks, reduces mean UI benefits received by about $143, and increases subsequent earnings by over $1,050. Much (but not all) of the effect results from a sharp increase in early exits from UI in the experimental treatment group compared to the experimental control group. These exits coincide with claimants finding out about their mandatory program obligations rather than with actual receipt of employment and training services. While the program targets those with the highest expected durations of UI benefit receipt, we find no evidence that these claimants benefit disproportionately from the program. In addition, we find strong evidence against the "common effect" assumption, as the estimated treatment effect differs dramatically across quantiles of the untreated outcome distribution. Overall, the profiling program appears to successfully reduce the moral hazard associated with the UI program without increasing the take-up rate.

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Paper provided by Econometric Society in its series Econometric Society World Congress 2000 Contributed Papers with number 1660.

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Date of creation: 01 Aug 2000
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Handle: RePEc:ecm:wc2000:1660
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  1. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
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  3. James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring.
  4. Orley Ashenfelter & David Ashmore & Olivier Deschenes, 1999. "Do Unemployment Insurance Recipients Actively Seek Work? Randomized Trials in Four U.S. States," NBER Working Papers 6982, National Bureau of Economic Research, Inc.
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  6. 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.
  7. Mark C. Berger & Dan Black & Jeffrey Smith, 2000. "Evaluating Profiling as a Means of Allocating Government Services," UWO Department of Economics Working Papers 200018, University of Western Ontario, Department of Economics.
  8. Walter Corson & David Long & Walter Nicholson, 1985. "Evaluation of the Charleston Claimant Placement and Work Test Demonstration," Mathematica Policy Research Reports 9af520d14c1b4654b8080d304, Mathematica Policy Research.
  9. Joshua Angrist & Alan Krueger, 1998. "Empirical Strategies in Labor Economics," Working papers 98-7, Massachusetts Institute of Technology (MIT), Department of Economics.
  10. Paul T. Decker & Christopher J. O'Leary, 1994. "Evaluating Pooled Evidence from the Reemployment Bonus Experiments," Upjohn Working Papers and Journal Articles 94-28, W.E. Upjohn Institute for Employment Research.
  11. Rebecca M. Blank & David Card, 1989. "Recent Trends in Insured and Uninsured Unemployment: Is There an Explanation?," NBER Working Papers 2871, National Bureau of Economic Research, Inc.
  12. Anderson, Patricia M & Meyer, Bruce D, 1997. "Unemployment Insurance Takeup Rates and the After-Tax Value of Benefits," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 913-37, August.
  13. John M. Barron & Wesley Mellow, 1979. "Search Effort in the Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 14(3), pages 389-404.
  14. Heckman, James J & Smith, Jeffrey, 1997. "Making the Most Out of Programme Evaluations and Social Experiments: Accounting for Heterogeneity in Programme Impacts," Review of Economic Studies, Wiley Blackwell, vol. 64(4), pages 487-535, October.
  15. 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.
  16. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," NBER Working Papers 6699, National Bureau of Economic Research, Inc.
  17. James J. Heckman & Jeffrey A. Smith, 1998. "Evaluating the Welfare State," NBER Working Papers 6542, National Bureau of Economic Research, Inc.
  18. repec:mpr:mprres:7757 is not listed on IDEAS
  19. Ehrenberg, Ronald G & Oaxaca, Ronald L, 1976. "Unemployment Insurance, Duration of Unemployment, and Subsequent Wage Gain," American Economic Review, American Economic Association, vol. 66(5), pages 754-66, December.
  20. Dolton, Peter & O'Neill, Donal, 1996. "Unemployment Duration and the Restart Effect: Some Experimental Evidence," Economic Journal, Royal Economic Society, vol. 106(435), pages 387-400, March.
  21. Anderson, Patricia M, 1992. "Time-Varying Effects of Recall Expectation, a Reemployment Bonus, and Job Counseling on Unemployment Durations," Journal of Labor Economics, University of Chicago Press, vol. 10(1), pages 99-115, January.
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  23. David Card & Phillip B. Levine, 1998. "Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program," NBER Working Papers 6714, National Bureau of Economic Research, Inc.
  24. Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
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