Labor Market Information Provision and Job FairsService Sector Female Labor Preference

Windfall Effect on Youth Training Supply

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In Simple Words

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.

Eligible young applicants in Cote d Ivoire

Not assigned a formal apprenticeship
Group used for comparison
Assigned subsidized dual apprenticeship
Any apprenticeship entry 52.8 percentage points higher

Entry during the experiment. Some formal participants would otherwise have entered traditional apprenticeships; this is net entry, not zero substitution.

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Research question

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.

Participants

N = 1,842 eligible youth applicants across 7 urban localities in Côte d'Ivoire (911 treatment, 921 control).

Study Design

Instrumental variable estimation using randomized program assignment to identify the youth windfall parameter ($\omega = 1 - IV$).

Results

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.

Takeaway

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.

Source and citation

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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.

Percentage points

The difference between two percentages.

ExampleA rise from 40% to 50% is 10 percentage points. Relative to the starting value, that is a 25% increase.

Office for National Statistics · Percentages ↗Read more about percentage points →

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