Estimating the Return to Training and Occupational Experience: The Case of Female Immigrants

45 Pages Posted: 26 Oct 2004

See all articles by Sarit Cohen-Goldner

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics

Zvi Eckstein

The Interdisciplinary Center (IDC); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 2004

Abstract

Do government provided training programs benefit the participants and the society? We address this question in the context of female immigrants who first learn the new language and then choose between working or attending government provided training. Although theoretically training may have several outcomes, most evaluations have focused on only one outcome of training: the expected wage. Training might have no direct effect on wage, however, but it affects employment probability in higher paid jobs nevertheless. In order to measure the return to government provided training and overcome the above reservations, we formulate an estimable stochastic dynamic discrete choice model of training and employment. Given the estimated model, the individual benefit is measured by the change in expected lifetime utility due to the effect of alternative training policy. The social return from training is measured by the expected increase in actual earnings minus the cost, due to a counterfactual policy. Our estimates imply that training has no significant impact on the mean offered wage in blue-collar occupation, but training increases the mean offered wage in white-collar occupation by 19%. Training also substantially increases the job offer rates in both occupations. Furthermore, counterfactual policy simulations show that free access to training programs relative to no training could cause an annual earnings growth of 31.3%. This large social gain (ignoring the cost of the program) comes mainly from the impact of training on the job offer probabilities and, consequently, on unemployment, and not, as conventionally thought, from the impact of training on potential earnings. Moreover, the average ex-ante expected present value of utility for a female immigrant at arrival (individual benefit) increases by 50% using a counterfactual policy of fully available training relative to the estimated restricted level of training opportunity.

Keywords: Immigration, occupation, training, transitions, unemployment, welfare

JEL Classification: J31, J68

Suggested Citation

Cohen-Goldner, Sarit and Eckstein, Zvi, Estimating the Return to Training and Occupational Experience: The Case of Female Immigrants (September 2004). Available at SSRN: https://ssrn.com/abstract=610242

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8948 (Phone)

IZA Institute of Labor Economics

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

Zvi Eckstein (Contact Author)

The Interdisciplinary Center (IDC) ( email )

P. O. Box 167
Herzliya, 69978, PA Pennsylvania 46150
United States
+972 9 9602706 (Phone)
+972 9 9602758 (Fax)

HOME PAGE: http://www1.idc.ac.il/Faculty/Eckstein/index.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

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