The Pre-programme Earnings Dip and the Determinants of Participation in a Social Programme. Implications for Simple Programme Evaluation Strategies.

The key to estimating the impact of a program is constructing the counterfactual outcome representing what would have happened in its absence. This problem becomes more complicated when agents, such as individuals, firms, or local governments, self-select into the program rather than being exogenously assigned to it. This paper uses data from a major social experiment to identify what would have happened to the earnings of self-selected participants in a job training program had they not participated in it. The authors investigate the implications of these earnings patterns for the validity of widely used before-after and difference-in-differences estimators.