1/L Get Training or Wait? Long-Run Employment Effects of Training Programs for the Unemployed in West Germany Bernd Fitzenberger, Aderonke Osikominu, and Robert Völter Comments October 2006

2/L Summary Applies matching methods to examine program impact over time Considers 3 programs with different durations –Practice Firm (PF): around 6 months –Provision of Specific Professional Skills and Techniques (SPST): around 6 months –Retraining (RT): up to 2 years (average 1 year) Evaluation is for quarters up to 30 quarters (nearly 8 years) after program entry Dependent variable is employment

3/L Summary For each kind of training, it is divided into three strata: –training that begins after 1-2 quarters of unemployment –training that begins after 3-4 quarters of unemployment –training that begins after 5-8 quarters of unemployment Comparison of “training” vs. “wait” is between those who receive a given training type within a particular stratum and those not receiving training during that stratum –Those not receiving training could receive some kind of training at a later point

4/L Overall Comments Matching methods are well executed Methods require numerous decisions & although one might quibble about some, each decision is thoughtfully discussed and justified Extremely valuable to obtain a set of estimates indicating impact on earnings over time –Long follow-up period Since I have few complaints with the analyses presented, I will provide some suggestions for additional analyses

5/L Suggestions Current paper looks at “cumulative” effect, looking at effects for –the first 8 quarters –the first 16 quarters –the first 24 quarters I would like comparisons of effects at various points in time, i.e., –quarters 9-16 –quarters 17-24

6/L Suggestions Benefits may well extend beyond 8 years; this is an important aspect of evaluating the program Estimating average effects for the last 4-12 quarters might be a reasonable estimate of long-term impact on flow of benefits –Assumed constant for the remainder of the working life, 10 years?

7/L 1-2 quarters 3-4 quarters 5-8 quarters Strata: Unemployment Prior to Program Entry Figure 2: Treatment Effect for Cohort Provision of Specific Professional Skills and Techniques (PSPT) Effects for strata 1 and 2 appear fairly stable after 20 quarters

8/L Suggestions Of interest: –Do programs that require more extended training (longer “lock-in” periods) ultimately produce higher benefit flows? –If not, there is little justification for them

9/L 1-2 quarters 3-4 quarters 5-8 quarters Strata: Unemployment Prior to Program Entry Figure 2: Treatment Effect for Cohort Provision of Specific Professional Skills and Techniques (PSPT) Suggestions Might it be useful to calculate average treatment effects combining strata? –Are differences across strata important, or even statistically significant?

10/L Suggestions Paper comparison question: –Compares those who get a given kind of training with those who don’t get training in at that point –Comparison group may get training (of some kind) at a future point or may get job –Most clearly policy-relevant question, since “waiting” is the alternative Alternative question: –Do individuals who wait longer get smaller benefits from the program? –This comparison would control for characteristics of those obtaining a particular kind of training at different point in time, which none of the current analyses do

11/L Suggestions Specification test –Paper presents data on employment 10 quarters prior to unemployment, comparing treated with comparison group –Control and treated groups are never different

12/L Suggestions Specification test –Paper presents data on employment 10 quarters prior to unemployment comparing treated with comparison group –Control and treated groups are never different –A weak “test” of model assumptions –Variables identifying employment during this period are included among the matching measures –This is a test of whether the matching is working: Doesn’t test basic conditional independence assumption Specification test would have to test behavior not explicitly included in matching variables.

13/L Suggestions As in other European studies, no attempt is made to determine effects on earnings for those employed –Justification: High minimum earnings in Europe; interest in individuals at bottom; concern with unemployment Is it possible that some kinds of training (e.g., retraining) have benefits beyond employment? –I think it would be useful to do some analyses predicting expected earnings, especially in comparisons on programs.