Long-Run Effects of Dynamically Assigned Treatments: A New Methodology and an Evaluation of Training Effects on Earnings

75 Pages Posted: 29 Jul 2019

See all articles by Gerard J. van den Berg

Gerard J. van den Berg

VU University Amsterdam - Department of Economics; Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics; Tinbergen Institute

Johan Vikström

Uppsala University; IFAU - Institute for Labour Market Policy Evaluation

Date Written: July 2019

Abstract

We propose and implement a new method to estimate treatment effects in settings where individuals need to be in a certain state (e.g. unemployment) to be eligible for a treatment, treatments may commence at different points in time, and the outcome of interest is realized after the individual left the initial state. An example concerns the effect of training on earnings in subsequent employment. Any evaluation needs to take into account that some of those who are not trained at a certain time in unemployment will leave unemployment before training while others will be trained later. We are interested in effects of the treatment at a certain elapsed duration compared to "no treatment at any subsequent duration". We prove identification under unconfoundedness and propose inverse probability weighting estimators. A key feature is that weights given to outcome observations of non-treated depend on the remaining time in the initial state. We study earnings effects of WIA training in the US and long-run effects of a training program for unemployed workers in Sweden. Estimates are positive and sizeable, exceeding those obtained by using common static methods, and suggesting a reappraisal of training.

Keywords: matching, duration analysis, program evaluation, dynamic treatment evaluation, treatment effects, unemployment, employment

JEL Classification: C14, J3

Suggested Citation

van den Berg, Gerard J. and Vikström, Johan, Long-Run Effects of Dynamically Assigned Treatments: A New Methodology and an Evaluation of Training Effects on Earnings (July 2019). IZA Discussion Paper No. 12470. Available at SSRN: https://ssrn.com/abstract=3427608

Gerard J. Van den Berg (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands
+31 20 444 6132 (Phone)
+32 20 444 6020 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Tinbergen Institute

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Johan Vikström

Uppsala University ( email )

Box 513
Uppsala, 751 20
Sweden

IFAU - Institute for Labour Market Policy Evaluation

Box 513
751 20 Uppsala
Sweden

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