Working Papers in Economics,
University of Gothenburg, Department of Economics

Abstract: Several studies have examined the effects of training programs on employment. Most of them assume that the effects of training are constant for all potential trainees. We use an econometric framework that allows studying the heterogeneous training effects on discrete outcomes. The treatment effect is allowed to vary depending on the trainee’s observable and unobservable characteristics, and allows selection into training to be determined in part by the trainee’s idiosyncratic treatment effect. Furthermore, we investigate the importance of the unobservables in the selection to training and how efficient the selection is with respect to the outcome. The results show small positive effects for the Swedish-born. The treatment on the treated is larger than the average treatment effect, indicating that the selection is stronger for the treated, and 40% of those treated gain by participating in training. Foreign-born have a negative effect from training the first year, with an average treatment effect larger than the treatment on the treated. From those who participated in training, only 11% experienced positive effect, while 38% were hurt by the training. The unobserved factors are important in the selection to training, as well as for the outcome. The effect of the selection is stronger for Swedish-born compared to foreign-born.

Keywords: labor market training; one factor model; selection; heterogeneous response; unobserved heterogeneity; treatment on the treated

JEL-codes: J31; J38

41 pages, May 30, 2002

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