The Limits of Mathematics and NP Estimation in ... - Chichilnisky

50 Advances in Econometrics - Theory and Applications4 Will-be-set-by-IN-TECHunemployment and employment states, we can identify two separate welfare training statesand one unemployment training state. 6The focus of this chapter is on poorly educated young men. Thus to be included in the sample,an individual had to be either 18 or 19 years of age at any time between 1987 and 1993 and havecompleted less than 11 years of schooling over the sample period. A high-school degree inQuébec usually entails at least 12 years of schooling. In principle, then, none of the individualsin our sample has earned a high-school diploma. With these selection criteria the final samplecontains 3068 individuals.The upper panel of Table 1 provides summary statistics for individuals who have notparticipated in a training program. The lower panel presents similar statistics for programparticipants. In the latter case, the mean durations in either employment, unemployment orwelfare are calculated both before and after training. An examination of the table revealsthat the two groups are very similar in terms of their observable characteristics; They bothhave the same average age and nearly identical schooling levels. Yet, there are significantdifferences in their respective labour market experiences. For instance, non-trainees havelonger spells in each of the three states reported in the table. On the whole, the proportion oftime non-trainees spend employed is slightly larger than that of trainees prior to training. Onthe other hand, once they have had training, the proportion of time trainees spend employedbecomes larger than that of non-trainees. This increase stems from the fact that the averageemployment duration decreases proportionately less that the average duration of welfare andunemployment spells. Taken at face value, this would suggest training programs benefitsomewhat to welfare recipients.Recall that only individuals who experienced a welfare spell between 1987 and 1993 and whowere aged 18 or 19 during that period are included in the sample. Those who are 18 or 19 yearsof age in January 1987 may have already been on the labour market for 2–3 years at most. Inorder to recreate their complete labour market histories as of the age of 16, it is necessary insome cases to go back as early as January 1984. 7 The start date and end date of each spell isused to create individual histories on the labour market. Overlaps between states are frequentand are not necessarily the result of coding errors. It may well be, for example, that a welfarespell and a work spell overlap. Program designs do not forbid this. In principle, such overlapscould be redefined as a separate state. Given the number of possible states, it is simply not6 The welfare files contain information dating back to 1979 and ending in December 1993. The SV filescontains information beginning in January 1987 and ending in December 1996. Finally, The ROEfiles contain information ranging from January 1975 to December 1996. The analysis focuses on the1987–1993 period due to data limitations.7 Data concerning unemployment spells are available only as of January 1987. Consequently, a smallproportion of unemployment spells occurring prior to 1987 may be wrongly coded as out of the labourforce (OLF). Two factors lead us to believe that the proportion of such spells is likely insignificant. First,the large majority of individuals who were 18 or 19 years of age in the years 1990 and beyond wherein the OLF, the employment or the welfare states between 16 and 19. Second, of those individuals, themajority who had an employment spell would not have qualified for UI benefits given the eligibilityrules that prevailed between 1984 and 1987.A similar problem arises with respect to employment spells. Indeed, spells that were ongoing inDecember 1993 will not show up in the ROE files until they are terminated. To avoid misclassifyingthese spells as OLF, the ROE files are searched as late as December 1996. Given the average lengthof employment spells reported in Table 1, it is very unlikely that many employment spells that wereongoing in December 1993 will still be ongoing as late as December 1996, and thus wrongly classifiedas OLF.