Windfall Effect on Youth Training Supply
RCTReview
When public training programs subsidize vocational education, some participants would have enrolled in informal private training even without the subsidy. Evaluating the net addition to total human capital requires measuring this deadweight substitution on the supply side.
Picture this
Imagine a city offering free bicycle passes to encourage cycling. Some people who claim the free passes were already planning to buy bicycles with their own money. The windfall effect measures how many pass recipients are simply saving their cash rather than becoming new cyclists.
What the evidence says
25.9% of formal apprentices substituted out of traditional informal apprenticeships ($\omega = 0.259$, p < 0.001); overall youth entry into any apprenticeship increased by 52.8 percentage points despite this 18.5 percentage point windfall drop.
- Who was studied
- N = 1,842 eligible youth applicants across 7 urban localities in Côte d'Ivoire (911 treatment, 921 control).
- How
- Instrumental variable estimation using randomized program assignment to identify the youth windfall parameter ($\omega = 1 - IV$).
What to do
Calculate the proportion of subsidized participants who would have pursued informal private training absent the subsidy to establish the net supply-side addition to total human capital.
From the source
"The share of youths entering formal apprenticeship over the course of the experiment increases by 71.2 percentage points... The difference between the two estimates shows that 18.5 percent of treated youths would have entered traditional apprenticeship in the absence of the intervention, a significant windfall effect."
Direct_and_Indirect_Effects_of_Subsidized_Dual_Apprenticeships.pdf