published in: International Journal of Manpower, 2004, 25 (8), 688-713
Swedish labor market programs appear large from an international perspective, yet their
consequences are not fully investigated and understood. In this paper we estimate a
switching regression model with training effect modeled as a random coefficient, partitioned
in an observed and unobserved component. We investigate labor market training for three
cohorts during the 80s and the beginning of the 90s on its effect on earnings. We separate
the analysis between Swedish-born and foreign-born individuals to identify differences in their
responses to training. The results indicate that there is positive sorting into training. We find
that the proportion of trainees having positive rewards from training was not very different
from the proportion having negative rewards. This means that the results do not support the
view that from efficiency considerations, too few persons were enrolled in labor market
training during this period. Differences in results across cohorts can be interpreted as being
caused by rapid changes in the labor market. Further, consistent with results from several
previous studies we find that being young often means no positive pay-off from training, and
the same is found for persons with only primary education. In conflict with what earlier studies
have shown, we found that males have a better pay-off from training than females. Rewards
from training were higher for foreign-born than for natives and rewards among the former
vary by place of birth.
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