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

43 Pages Posted: 28 Aug 2014

See all articles by Marco Caliendo

Marco Caliendo

University of Potsdam; Institute for the Study of Labor (IZA)

Robert Mahlstedt

IZA

Oscar A. Mitnik

Inter-American Development Bank; IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2014

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.

Keywords: Matching, Unconfoundedness, Unobervables, Selection Bias, Heterogeneity, Personality Traits, Active Labor Market Policy

JEL Classification: C21, D4, J68

Suggested Citation

Caliendo, Marco and Mahlstedt, Robert and Mitnik, Oscar A., Unobservable, But Unimportant? The Influence of Personality Traits (and Other Usually Unobserved Variables) for the Evaluation of Labor Market Policies (August 2014). DIW Berlin Discussion Paper No. 1407. Available at SSRN: https://ssrn.com/abstract=2487797 or http://dx.doi.org/10.2139/ssrn.2487797

Marco Caliendo (Contact Author)

University of Potsdam ( email )

August-Bebel Strasse 89
Potsdam, 14482
Germany
+49(0)331/9773225 (Phone)
+49(0)331/9773210 (Fax)

HOME PAGE: http://www.uni-potsdam.de/en/empwifo/news.html

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Oscar A. Mitnik

Inter-American Development Bank ( email )

1300 New York Ave, NW
Washington, DC 20577
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
91
Abstract Views
646
rank
261,499
PlumX Metrics