Evaluation of Language Training Programs in Luxembourg using Principal Stratification

Observational Studies () Submitted ; Published Evaluation of Language Training Programs in Luxembourg using Principal Stratification Michela Bia michela.bia@liser.lu Evaluation Unit LISER Luxembourg Institute of Socio-Economic Research Luxembourg Alfonso Flores-Lagunes afloresl@syr.edu Department of Economics and Center for Policy Research Syracuse University, USA, and IZA, Bonn, and Global Labor Organization (GLO) Andrea Mercatanti andrea.mercatanti@univr.it Department of Economics, University of Verona, Italy, and Global Labor Organization (GLO) Abstract In a world increasingly globalized, multiple language skills can create more employment opportu- nities. Several countries include language training programs in active labor market programs for the unemployed. We analyze the effects of a language training program on the re-employment probability and hourly wages simultaneously, using high-quality administrative data from Luxem- bourg. We address selection into training with an unconfoundedness assumption and account for the complication that wages are “truncated” by unemployment by adopting a principal stratifica- tion framework. Estimation is undertaken with a mixture model likelihood-based approach. To improve inference, we use the individual’s hours worked as a secondary outcome and a stochastic dominance assumption. These two features considerably ameliorate the multimodality problem commonly encountered in mixture models. We also conduct a sensitivity analysis to assess the unconfoundedness assumption. Our results suggest a positive effect (of up to 12.7 percent) of the language training programs on the re-employment probability, but no effects on wages for those who are observed employed regardless of training participation.