Heterogeneous Returns to Training an Analysis with German Data Using Local Instrumental Variables

26 Pages Posted: 17 Jan 2006 Last revised: 11 Sep 2018

See all articles by Anja Kuckulenz

Anja Kuckulenz

Center for European Economic Research (ZEW)

Michael F. Maier

Center for European Economic Research (ZEW)

Date Written: 2006

Abstract

Empirical work on the wage impact of training has noted that unobserved heterogeneity of training participants should play a role. The expected return to training, which partly depends on unobservable characteristics, is likely to be a crucial criterion in the decision to take part in training or not. We try to account for this fact by using recent advances in estimating returns to schooling, which allow for selection on unobservables, and apply it to estimating the impact of training on earnings. Allowing heterogeneity to be unobserved by the econometrician, but assuming that individuals may act upon this heterogeneity, completely changes the interpretation and properties of commonly used estimators. Our results based on local instrumental variables suggest that traditional estimates of the wage impact of training overestimate this effect.

Keywords: Vocational training, treatment effects, semiparametric estimation

JEL Classification: J31, C14, C21

Suggested Citation

Kuckulenz, Anja and Maier, Michael F., Heterogeneous Returns to Training an Analysis with German Data Using Local Instrumental Variables (2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-002, Available at SSRN: https://ssrn.com/abstract=875528 or http://dx.doi.org/10.2139/ssrn.875528

Anja Kuckulenz (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Michael F. Maier

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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