Evaluation of Language Training Programs in Luxembourg using Principal Stratification

Abstract

In a world increasingly globalized, multiple language skills can create more employment opportunities. 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 of the unemployed simultaneously, using highquality administrative data from Luxembourg. We address selection into training by exploiting the rich administrative information available, and account for the complication that wages are "truncated" by unemployment by adopting a principal stratification 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 sensitivity analysis to assess the unconfoundedness assumption employed. Our results strongly 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. It appears that, in the context of an open and multilingual economy, language training improve employability but the language skills acquired are not sufficiently rewarded to be reflected in higher wages.

Active labour market policy use in Luxembourg: evidence from a firm survey

“…In other words, do firms use the subsidies to permanently hire employees or are the subsidies mainly used to recurrently hire temporary workers without the prospect of conversion into a permanent job. One could also compare labour market outcomes of ALMP participants to nonparticipants to assess the effectiveness of ALMP participation, as was for example done by Bia et al (2018) with respect to the effectiveness of language training programmes in Luxembourg. Last but not least, the benefits of ALMPs programmes need to be weighed against the respective costs.…”

“…In fact, this particular French ALMP was discontinued in 2008. Using administrative data, Bia et al (2018) show that language training programs increase the re-employment probability of unemployed people in Luxembourg but has not effect on their wages. The number and share of jobseekers eligible for hire with the assistance of ALMPs rose after the onset of the crisis.…”

“…Zanardelli (2006) studied the effectiveness of Luxembourg ALMPs using employee data. More recently, Bia et al (2018) evaluated the effect of language training programs for the unemployed in Luxembourg.…”