Sign reversal in LIVE treatment effect estimates: The effect of vocational training on unemployment duration

We use administrative records in Israel to identify the treatment effect of vocational training for the unemployed on the duration of unemployment. We randomize training using data on the availability of courses in and around the time of becoming unemployed. This assumes that the timing of entry into unemployment is random, and course availability around the time of entry is independent of current labor market conditions. According to naïve estimators, which ignore self-selectivity, training reduces unemployment durations. The same applies to linear (IV) estimators, which control for self-selectivity. However, the opposite is found when non-linear IV estimators are used, i.e. training prolongs unemployment durations. Sign reversal depends on how the first stage is specified. A non-nested test indicates that the nonlinear estimate of the treatment effect is preferable to its linear counterpart, in which case training prolongs unemployment spells.