Endogenous Stratification Equity Gains

In Simple Words

Endogenous stratification uses baseline demographic traits to predict each participant's baseline earning potential, then divides the sample into predicted outcome tiers. It operates like sorting hospital patients by baseline illness severity before administering medicine to verify if the sickest patients experience the greatest relative recovery.

Research question

Standard average treatment effect estimates in randomized trials obscure whether active labor market policies benefit the most disadvantaged job-seekers or primarily assist candidates who would have succeeded anyway.

Participants

N = 3,052 young job-seekers aged 18–29 in Addis Ababa, Ethiopia.

Study Design

Split-sample endogenous stratification predicting 4-year earnings using baseline covariates, evaluated via RCT subgroup heterogeneity analysis.

Results

For the lowest-predicted-earnings stratum, the job application workshop increased 4-year earnings by 50% over the control mean (p = 0.0696 for equality with the high-predicted-earnings group). This intervention reduced the earnings gap between high- and low-predicted earners from 142% down to 54%.

Takeaway

Incorporate split-sample endogenous stratification into program evaluations to measure whether labor interventions systematically compress inequality between high- and low-potential workers.

Read alongside the research

Plain-English glossary

Original explanations, informed by the references below. Examples are illustrations, not data from the studies above. The research text stays unchanged.

Baseline

The starting measurements in a study. Researchers use these to compare what participants were like at the start with what happens later.

ExampleBefore a training programme starts, researchers measure workers’ earnings. That first measurement is the baseline.

GET-IT glossary · Baseline characteristics ↗Read more about baseline →

Randomized controlled trial

A study that uses chance, like drawing lots, to decide who receives each option being compared. Researchers compare the groups’ outcomes to estimate the effect of those options.

ExampleA lottery assigns volunteers to a training programme or a comparison group. Researchers then compare their outcomes.

GET-IT glossary · Randomized study ↗Read more about randomized controlled trial →

Related findings

• Endogenous Stratification and Equity Gains →Labour & employment

  Imagine a footrace where runner speed is obscured by heavy backpacks given to certain runners based on their background. Removing the opacity allows judges to see that those wearing the heaviest backpacks are actually fast runners, disproportionately lifting the slowest baseline performers to the front of the pack and closing the finish-line gap.

• Randomized Controlled Evaluation of Workforce Programs →Labour & employment

  A randomized controlled trial acts like a scientific coin flip that creates two identical twin groups of job seekers. By randomly assigning qualified applicants either to receive sectoral training or to a control group receiving standard services, any subsequent difference in earnings can be attributed solely to the training program itself.

• Statistical Discrimination Mitigation →Labour & employment

  Reducing signal variance through objective performance credentials reduces employer reliance on general background traits. When clear individual data is visible, decision-makers judge candidates on verified personal competence rather than group stereotypes.

• Welfare Reversal in Large-Scale Policy Rollout →Labour & employment

  Imagine a city building a dedicated express lane for commuter buses. When 20% of commuters use the bus lane, traffic flows smoothly, transit times plummet, and the net benefit to the city is high.