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Unobservable, but Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Evaluation of Labor Market Policies

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  • Caliendo, Marco

    () (University of Potsdam)

  • Mahlstedt, Robert

    () (University of Copenhagen)

  • Mitnik, Oscar A.

    () (Inter-American Development Bank)

Abstract

Many commonly used treatment effects estimators rely on the unconfoundedness assumption ("selection on observables") which is fundamentally non-testable. When evaluating the effects of labor market policies, researchers need to observe variables that affect both treatment participation and labor market outcomes. Even though in many countries it is possible to access (very) informative administrative data, concerns about the validity of the unconfoundedness assumption remain. The main concern is that the observed characteristics of the individuals may not be enough to properly address potential selection bias. This is especially relevant in light of the research on the influence of personality traits and attitudes on economic outcomes. We exploit a unique dataset that contains a rich set of administrative information on individuals entering unemployment in Germany, as well as several usually unobserved characteristics like personality traits, attitudes, expectations, and job search behavior. This allows us to empirically assess how estimators based on the unconfoundedness assumption perform when alternatively including or not these usually unobserved variables. Our findings indicate that these variables play a significant role for selection into treatment and labor market outcomes, but do not make for the most part a significant difference in the estimation of treatment effects, compared to specifications that include detailed labor market histories. This suggests that rich administrative data may be good enough to draw policy conclusions on the effectiveness of active labor market policies.

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  • Caliendo, Marco & Mahlstedt, Robert & Mitnik, Oscar A., 2014. "Unobservable, but Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Evaluation of Labor Market Policies," IZA Discussion Papers 8337, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp8337
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    1. Dengler, Katharina, 2015. "Effectiveness of Sequences of Classroom Training for Welfare Recipients: What works best in West Germany?," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113119, Verein für Socialpolitik / German Economic Association.
    2. Caliendo, Marco & Künn, Steffen & Weißenberger, Martin, 2016. "Personality traits and the evaluation of start-up subsidies," European Economic Review, Elsevier, vol. 86(C), pages 87-108.
    3. Lang, Julia & Dauth, Christine, 2017. "Should the unemployed care for the elderly? The effect of subsidized occupational and further training in geriatric care," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168130, Verein für Socialpolitik / German Economic Association.
    4. Stephanie Lluis & Brian McCall, 2017. "Part-Time Work and Crowding-Out Implications of Employment Insurance Pilot Initiatives," Working Papers 1701, University of Waterloo, Department of Economics, revised Jan 2017.
    5. Kauhanen, Antti, 2018. "The Effects of an Education-Leave Program on Educational Attainment and Labor-Market Outcomes," ETLA Working Papers 56, The Research Institute of the Finnish Economy.
    6. repec:eee:jeborg:v:136:y:2017:i:c:p:161-173 is not listed on IDEAS
    7. Boockmann, Bernhard & Brändle, Tobias, 2015. "Coaching, Counseling, Case-Working: Do They Help the Older Unemployed Out of Benefit Receipt and Back into the Labor Market?," IZA Discussion Papers 8811, Institute for the Study of Labor (IZA).
    8. Caliendo, Marco & Lee, Wang-Sheng & Mahlstedt, Robert, 2017. "The gender wage gap and the role of reservation wages: New evidence for unemployed workers," Journal of Economic Behavior & Organization, Elsevier, vol. 136(C), pages 161-173.
    9. Steffen Künn, 2015. "The challenges of linking survey and administrative data," IZA World of Labor, Institute for the Study of Labor (IZA), pages 214-214, December.
    10. Fitzenberger, Bernd & Furdas, Marina & Sajons, Christoph, 2016. "End-of-year spending and the long-run employment effects of training programs for the unemployed," Freiburg Discussion Papers on Constitutional Economics 16/08, Walter Eucken Institut e.V..
    11. Dauth, Christine, 2017. "Regional discontinuities and the effectiveness of further training subsidies for low-skilled employees," IAB Discussion Paper 201707, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    12. Hagen, Tobias, 2016. "Econometric Evaluation of a Placement Coaching Program for Recipients of Disability Insurance Benefits in Switzerland," Annual Conference 2016 (Augsburg): Demographic Change 145736, Verein für Socialpolitik / German Economic Association.
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    15. Dauth, Christine & Lang, Julia, "undated". "Should the unemployed care for the elderly? : The effect of subsidized occupational and further training in elderly care," IAB Discussion Paper 201713, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    16. Homrighausen, Pia, 2014. "Differential pricing and private provider performance," IAB Discussion Paper 201425, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    Keywords

    active labor market policy; personality traits; heterogeneity; selection bias; unobervables; unconfoundedness; matching;

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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