Evaluation of the Australian Wage Subsidy Special Youth ...

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The empirical methods used for the evaluation of labour market programs do themselves
require assessment. It is clear that the choice of an estimator to evaluate a program
requires judgments about the outcome equation, participation rules and their relationship
[Heckman, Lalonde and Smith (1999) p2025]. Yet the testing of evaluation models on
pre-program data, a specification test suggested and usually attributed to Heckman and
Hotz (1989), is shown to be of no use due to the ‘alignment fallacy’ [Heckman et al.
(1999): 2031]. In addition, evaluators are usually unable to test the maintained identifying
assumptions of their empirical models. In light of this modelling uncertainty, the validity
of the choice of a single method for evaluation is quite low. Benefits can accrue to
varying the modelling choice in order to test the sensitivity of the outcome to the choice
of assumptions. This re-analysis of SYETP enables the evaluation methods used to be
assessed.
An advantage to future literature reviews exists as a result of the re-evaluation of program
data. For example, a recent review of the literature by Marx (2001) has already subsumed
the results of the Richardson (1998) analysis of the Australian wage subsidy Special
Youth Employment and Training Program (SYETP). Such reviews try to gain an
overview and collate the evaluation findings together. Without a re-analysis, the
published results stand as the only ones available, even if they are not ideal.
From a scientific perspective, it is also good to ‘go back to the drawing board’. This
enables a new examination of the material, from a different perspective. A new set of
questions can be asked from the same data. In order to provide a sound basis for this, a
replication of the previous analysis can allow the new analysis to build from where the
former analysis finished.
The econometric analyses of SYETP conducted in this research use the Australian
Longitudinal Survey (ALS) to provide program data for evaluation of SYETP. Program
data should be seen as a valuable resource, which can be drawn upon for analysis.
Program data is rarely available. Although it seems many programs have information
gathered, administratively or through surveys, most of this does not become publicly