Wednesday, April 16, 2008

Been down so long it looks like up to me

I just read through an interesting new NBER working paper (ungated version here), "Training Disadvantaged Youth in Latin America: Evidence from a Randomized Trial". Here is the abstract:

Youth unemployment in Latin America is exceptionally high, as much as 50% among the poor. Vocational training may be the best chance to help unemployed young people at the bottom of the income distribution. This paper evaluates the impact of a randomized training program for disadvantaged youth introduced in Colombia in 2005 on the employment and earnings of trainees. This is one of a couple of randomized training trials conducted in developing countries and, thus, offers a unique opportunity to examine the causal impact of training in a developing country context. We use originally collected data on individuals randomly offered and not offered training. We find that the program raises earnings and employment for both men and women, with larger effects on women. Women offered training earn about 18% more than those not offered training, while men offered training earn about 8% more than men not offered training. Much of the earnings increases for both men and women are related to increased employment in formal sector jobs following training. The benefits of training are greater when individuals spend more time doing on-the-job training, while hours of training in the classroom have no impact on the returns to training. Cost-benefit analysis of these results suggests that the program generates a large net gain, especially for women.

The training was 3 months in a classroom and then 3 months "on the job". While these effects seemed small and discouraging to me, they are much larger and stronger than the effects found in randomized trials done in rich countries;

These results stand in strong contrast to most of the results obtained in developed countries and, in particular, in the U.S. (see, e.g., Heckman and Krueger, 2003; Burghardt and Schochet, 2001; Heckman, LaLonde and Smith, 1999). In these countries the effects are often small, if at all positive, and it is often unclear whether from they are worth implementing from a cost-benefit perspective.

Also interesting is that the larger effect for women has also been found in evaluating non-randomized programs in developing countries.

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