Evaluation of the Australian Wage Subsidy Special Youth ...

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22 1.3.4 Observables and unobservables Friedlander et al. (1997) express succinctly the difference between selection on observables and selection on unobservables. The behaviour of the participants is expressed in the econometric model: (21) Y it = c t X i + b t D io + u it t>0 employment (22) D io = a 0 Z i + e io participation Again, Y it is the outcome, such as employment, for the ith person in period t , where t=0 is the period where the treatment occurs. The X i and Zi are sets of exogenous characteristics for the ith individual, that can be overlapping and are measured pre – program. The importance of measuring pre-program is to avoid endogeneity, where the characteristics may change after program entry due to the program, these would confound measurement of the program effect. D io is the program participation binary variable, D io =1 if participant and D io =0 if not (the comparison group); u it, e io are error terms. The mean effect of the program in period t after participation is the coefficient b t . If there is no correlation between the participation and the error in the employment equation E(D io , u it ) =0, then an unbiased estimate of the coefficient b t is obtained simply from the employment equation (21). Correlations between the participation and the employment error E(D io , u it ) ≠ 0, can arise from selection due to observables or unobservables (Friedlander et al. (1997), Heckman and Robb (1985), Heckman and Hotz (1989)). The correlation between the participation and the employment error E(D io , u it ) ≠0 can arise through either Z i or e io, in the equation (22) representing participation . If the error terms for employment and participation are uncorrelated E(u it, e io ) = 0 , but there is correlation between the error of the employment equation and the characteristics affecting participation E( Z i ,u it ) ≠ 0 then selection is on observables. Conversely, when there is selection on unobservables, the error terms for employment and participation are correlated E(u it, e io ) ≠ 0 but there is no
23 correlation for the error of the employment equation and the characteristics affecting participation E( Z i ,u it ) = 0. The Heckman selection model assumes selection on unobservables and attempts to control for that, while propensity score matching assumes selection on observables. In the later chapters, these modelling methods and their assumptions are presented and applied. 1.4 Brief comment on recent overseas evidence of wage subsidy evaluations This section reviews some existing information for wage subsidy programs in other countries. This appraisal is limited to recent evidence since the 1990’s, as older material is well reviewed elsewhere. Only micro-economic evaluation evidence is addressed. The main aim is to consolidate a general perspective of the wage subsidy evidence found overseas. The exposition is then not comprehensive with regard to the details of the programs or a critical review of the evaluation evidence. Instead, key themes are identified. A number of published reviews provide recent overviews of wage subsidies and other programs. To avoid repetition, their conclusions are summarized here. Katz (1996) pp31-33 and Table 4 found that some targeted wage subsidies gave positive gains. It was found that the US Targeted Jobs Tax Credit and YIEPP private sector wage subsidy, might have modestly raised disadvantaged youth employment rates. However it was concluded that there was little satisfactory formal evidence of the impacts of wage subsidies, and that many studies were not compelling in their evidence due to flawed evaluation methods or poor data. Friedlander, Greenberg and Robins (1997) concentrate on US programs targeted on the disadvantaged, including wage subsidies. However the focus of the literature review was to get an overview of whether, as a whole, any social programs had gains for any groups of men, women and youths. The main recent wage subsidy program in the US has been the JTPA-II-A subsidised on-the-job training, for which a random assignment experiment
Page 1: i Evaluation of the Australian Wage
Page 5 and 6: v Declaration I hereby declare that
Page 7 and 8: in method and assumptions. The orth
Page 9 and 10: 3.3 Data and variables used for est
Page 11 and 12: List of Tables and Figures Figure 1
Page 13 and 14: Table A2.0b Univariate Probit of pa
Page 15 and 16: xv Abstract The job subsidy Special
Page 17 and 18: 1 1: Wage subsidy theory and evalua
Page 19 and 20: 3 programs of providing benefits an
Page 21 and 22: 5 The empirical methods used for th
Page 23 and 24: 7 how the outcomes from these metho
Page 25 and 26: 9 employment effect could be mainly
Page 27 and 28: 11 Real Wage Employment Figure 1.1:
Page 29 and 30: 13 are two types of unemployment, s
Page 31 and 32: 15 Real wages are predetermined whe
Page 33 and 34: 17 Vella (1998), Heckman, Lalonde a
Page 35 and 36: 19 Each individual has two potentia
Page 37: 21 this case, if there was no data
Page 41 and 42: 25 Table 1.3 collects together some
Page 43 and 44: 27 Table 1.3 Brief overview of rece
Page 45 and 46: 29 necessarily brief. Then, the evi
Page 47 and 48: 31 limited applications, such as fo
Page 49 and 50: 33 who participated. It was conclud
Page 51 and 52: 35 term unemployed for over 12 of t
Page 53 and 54: 37 importance of the subsidy second
Page 55 and 56: 39 differences in characteristics t
Page 57 and 58: 41 Matching methods are theoretical
Page 59 and 60: 43 2.2 SYETP implementation As SYET
Page 61 and 62: 45 In July1978, the subsidy was cal
Page 63 and 64: 47 In January 1979, variations were
Page 65 and 66: 49 benefits were paid at a slightly
Page 67 and 68: 51 2.2.3 SYETP operation Earlier re
Page 69 and 70: 53 ceiling constraints’ applied t
Page 71 and 72: 55 Award Conditions for employment
Page 73 and 74: 57 Harris (2001) claims that during
Page 75 and 76: 59 display boards listed details of
Page 77 and 78: 61 restriction was used. If there w
Page 79 and 80: 63 to the end of the 1980’s. An o
Page 81 and 82: 65 for teens overall had risen, emp
Page 83 and 84: 67 for Australia using data from th
Page 85 and 86: 69 training, can provide a form of
Page 87 and 88: 71 employer survey estimates were t
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73 provisions for SYETP and extende
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75 withdrawals occurred at similar
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77 Table 2.17 State usage of progra
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79 2.3.1 Stretton (1982, 1984) 53 S
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81 Stretton attributed the success
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83 included in the employment model
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85 completers. Their argument was t
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87 was an issue for the data. Unlik
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89 Table 2.21 Richardson (1998) Est
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91 2.3.5 General discussion Some ge
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93 Controlling for differences in i
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95 taken by a previous researcher a
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97 If employability is assumed to b
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99 suitability of the underlying as
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101 Heckman, Lalonde and Smith (199
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103 effect on employment relative t
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105 Table 3.1, Part A Employment eq
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107 (-1.80) (-1.80) Tradesperson -0
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109 duration of Pre-June 1984 unemp
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111 4: Study 2 Propensity score mat
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113 Propensity score matching provi
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115 4.2 Propensity score matching m
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117 covariates that influence the a
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119 (7) E(Y c | D=1) = E P(X) {E[Y
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121 For CIA to be plausible, a ‘r
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123 employment and programme partic
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Highest qualification in 1984 (1.56
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127 4.6 Distribution of the propens
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129 Figure 4.3 Histograms of estima
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131 Table 4.5 Summary statistics fo
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133 Table 4.5, that the variance of
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135 Table 4.6 Matching results, Sin
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137 Table 6.3 using Swedish data wi
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139 matching is the ability to weed
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141 Table 4.7 Matching results, All
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143 the unobserved component. If th
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145 5: Study 3 Attrition and non-re
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147 occur by design, because the mi
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149 (1990) extended and improved th
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151 (10) A* = δ 0 + δ 1 x +δ 2 z
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153 again from September to Novembe
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155 5.5.2 Univariate examination of
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157 lower, the job lengths are only
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159 Work limited by health 1984 0.1
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161 The characteristics of the SYET
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163 para-professional Mother not em
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165 comparison group where the shar
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167 5.5.4 Attrition: natural attrit
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169 both sources that impose change
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171 para-professional Father not em
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173 work in later sections, this su
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175 Table 5.6: Effect of selection/
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177 appropriate to discard these fr
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179 Australia/Tasmania. Amongst tho
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181 Table 5.5a Summary statistics b
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183 5.6.1.2 Effects of the non-resp
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185 3 years + -0.35 -0.47 -0.34 -0.
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187 5.7 Multivariate analysis of ef
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189 proportion of time spent unempl
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191 post-school qualification, and
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193 Generally, those variables foun
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195 longj0 Longest job by 1984 < 1
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197 adopted in order to maintain co
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199 6: Study 4 Weighting to counter
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201 Table 6.1, part A Employment eq
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203 Methodist 0.133 0.261 (0.77) (1
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205 CEP referrals 1984 0.143* 0.128
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207 6.2 Results of weighting the PS
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209 The distribution of the propens
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211 Table 6.3 Weighted probit used
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213 (0.76) Tradesperson mtrad 0.20
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215 Table 6.5 Summary statistics fo
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217 Table 6.7 Matching results, sin
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219 6.3 Discussion The comparison o
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221 the selection into SYETP and th
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223 Heteroskedasticity is a violati
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225 Table 7.1, Part A Employment eq
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227 (1.26) (1.28) (1.16) Mothers oc
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229 Other Post-School qualification
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231 7.1.2 Exclusion restriction in
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233 Finally, the third panel of new
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235 Table 7.2 summary of changes to
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237 schooling that was statisticall
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239 (0.25) (0.21) 3 years + -0.50 -
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241 Table 7.4 Summary of distributi
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243 7.2.2 Propensity score matching
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245 original model, but with the pe
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247 maintained, then the Heckman bi
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249 Table 7.6 Weighted Probit used
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251 Table 7.7 Summary of distributi
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253 8: Summary and Conclusions The
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255 over which it ran, the review m
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257 the Heckman and PSM methods wer
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259 posited that that such sensitiv
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261 Description Derivation and deta
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Appendix 2 Tables 263
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2 years 0.28 0.07 (1.70) (1.70) 3 y
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267 Table A2.0b Univariate Probit o
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269 Religion brought up in (1.52) (
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271 hq9_84 Year 9 of school or less
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273 Table A2.1 Continued Means and
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275 mtrad Tradesperson 0.04 0.04 0.
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277 Year 9 of school or less -0.19
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279 Table A2.3 Probit of SYETP part
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281 (0.22) (0.44) (0.67) (0.89) Tra
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283 Table A2.5a Univariate probit f
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285 Manager/professional/para-profe
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3 years + -0.04 (2.13)* CEP referra
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289 Table A2.6 Part A Employment eq
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291 Table A2.6 Part B Selection/par
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301
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BLMR Bureau of Labour Market Resear
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Fay, R.G. (1996) "Enhancing the eff
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Heckman J.J. and Smith, J. A. (1998
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Lewis, H.G. (1963) "Unionism and re
Page 327 and 328:
Quandt, R. (1972) "A new approach t
Page 329 and 330:
Stromback, M. and Dockery, A. (2000
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