Instrumental variables estimates of the effect of subsidized training on the quantiles of trainee earnings

52 Pages·1999·1.7 MB·English

by  Abadie, Alberto

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working paper
department
economics
of
Instrumental Variables Estimates ofthe
Effect ofSubsidized Training on the
Quantiles ofTrainee Earnings
Alberto Abadie
Joshua Angrist
Guido Imbens
No. 99-16 October 1999
massachusetts
institute of
technology
50 memorial drive
Cambridge, mass. 02139

WORKING PAPER
DEPARTMENT
OF ECONOMICS
Instrumental Variables Estimates ofthe
Effect ofSubsidized Training on the
Quantiles ofTrainee Earnings
Alberto Abadie
Joshua Angrist
Guido Imbens
No. 99-16 October 1999
MASSACHUSETTS
OF
INSTITUTE
TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASS. 02142
PliACHuSETTS INSTITUTE
OFTECHNOLOGY
LIBRARIES
Instrumental Variables Estimates of the Effect of
Subsidized Training on the Quantiles of Trainee
Earnings*
—
Alberto Abadie MIT
—
Joshua Angrist MIT and NBER
—
UCLA NBER
Guido Imbens and
Revised: September 1999
Abstract
The effect of government programs on the distribution of participants' earnings is
important for program evaluation and welfare comparisons. This paper reports es-
timates of the effects of JTPA training programs on the distribution of earnings.
The estimation uses a new instrumental variable (IV) method that measures pro-
gram impacts on the quantiles of outcome variables. This quantile treatment effects
(QTE) estimator accommodates exogenous covariates and reduces to quantile regres-
sion when selection for treatment is exogenously determined. The QTE estimator can
be computed as the solution to a convex linear programming problem, although this
requires first-step estimation of a nuisance function. We develop distribution theory
for the case where the first step is estimated nonparametrically. For women, the
empirical results show that the JTPA program had the largest proportional impact
at low quantiles. Perhaps surprisingly, however, JTPA training raised the quantiles
of earnings for men only in the upper half of the trainee earnings distribution.
*We thank Moshe Buchinsky, Gary Chamberlain, Jinyong Hahn, Jerry Hausman, Whitney Newey,
Shlomo Yitzhaki, and seminar participants at Berkeley, MIT-Harvard, Penn, and the Econometric Society
Summer 1998 meetings for helpful comments and discussions. Thanks also go to Erik Beecroft at Abt
Associates for providing us with the National JTPA Study data and for helpful discussions. Abadie
acknowledges financial support from the Bank of Spain. Imbens acknowledges financial support from the
Sloan Foundation.