The Value of Earning for Learning: Performance Bonuses in Immigrant Language Training
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The value of earning for learning: performance bonuses in immigrant language training Olof Åslund Mattias Engdahl WORKING PAPER 2012:24 The Institute for Evaluation of Labour Market and Education Policy (IFAU) is a research institute under the Swedish Ministry of Employment, situated in Uppsala. IFAU’s objective is to promote, support and carry out scientific evaluations. The assignment includes: the effects of labour market and educational policies, studies of the functioning of the labour market and the labour market effects of social insurance policies. IFAU shall also disseminate its results so that they become accessible to different interested parties in Sweden and abroad. IFAU also provides funding for research projects within its areas of interest. The deadline for applications is October 1 each year. Since the researchers at IFAU are mainly economists, researchers from other disciplines are encouraged to apply for funding. IFAU is run by a Director-General. 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The purpose of the Working Paper Series is to provide a factual basis for public policy and the public policy discussion. ISSN 1651-1166 The value of earning for learning: performance bonuses in © immigrant language training by Olof Åslund§ and Mattias Engdahl¨ December 10, 2012 Abstract We study the effects of performance bonuses in immigrant language training for adults. A Swedish policy pilot conducted in 2009–2010 gave a randomly assigned group of municipalities the right to grant substantial cash bonuses to recently arrived migrants. The results suggest substantial effects on average student achievement. But these were fully driven by metropolitan areas; in other parts of Sweden performance was unaffected. The relative effects were larger for younger students but similar for men and women, and present for migrants from different parts of the world. The bonus had a less clear impact on enrollment, but there are indications that it may have increased the probability of progressing to bonus-awarding courses in metropolitan areas. Keywords: immigration, language training, performance bonus JEL-codes: J08, J15, I24 © We are grateful for valuable comments and suggestions from Magnus Carlsson, Marcus Eliason, Erik Grönqvist and from seminar participants at IFAU, the 2012 Swedish Immigration Research Workshop, and IBF. § IFAU, Uppsala University, UCLS, IZA and CReAM ¨ Uppsala University, Department of Economics and UCLS IFAU – The value of earning for learning: performance bonuses in immigrant language training 1 Table of contents 1 Introduction ......................................................................................................... 3 2 Theoretical considerations and previous evidence .............................................. 4 2.1 Financial awards in education – motivations and expectations .......................... 4 2.2 Empirical evidence on economic incentives in education ................................... 6 2.3 Immigrant language skills and labor market outcomes ....................................... 7 3 The Swedish language tuition system for immigrants ........................................ 8 3.1 Previous studies of the Sfi tuition system ......................................................... 11 4 The design of the policy pilot ............................................................................ 12 4.1 The performance bonus ..................................................................................... 13 4.2 Limitations of the design ................................................................................... 14 5 Data sources and descriptive statistics .............................................................. 15 5.1 Data on the foreign-born population and the participants in language training 15 5.2 Bonus payments ................................................................................................ 18 6 Empirical analysis ............................................................................................. 19 6.1 Choosing an empirical strategy ......................................................................... 19 6.2 Empirical specification ...................................................................................... 23 6.3 Effects on enrollment ........................................................................................ 24 6.4 Effects on student achievement ......................................................................... 25 6.5 Variations and robustness checks ...................................................................... 29 6.5.1 Time frame for completion................................................................................ 29 6.5.2 Time-varying effects ......................................................................................... 29 6.5.3 Achievement conditional on enrollment ........................................................... 30 6.5.4 Strategic behavior – relocation and course choice ............................................ 31 6.5.5 Additional specification checks......................................................................... 32 6.6 Effects of extra funds ........................................................................................ 32 7 Conclusions ....................................................................................................... 33 References ....................................................................................................................... 36 Appendix ......................................................................................................................... 43 2 IFAU – The value of earning for learning: performance bonuses in immigrant language training 1 Introduction A central idea in economics is that we act on economic incentives: increasing the rewards for a certain type of behavior will make us more likely to behave in that way. Despite the theoretical predictions, the empirical evidence from education research is mixed. While a number of randomized trials suggest that financial incentives do improve student achievement (e.g., Angrist, Lang and Oreopoulos 2009, Angrist et al. 2002, Kremer, Miguel and Thornton 2009, Angrist and Lavy 2009, Dearden et al. 2009, Dee 2009 and Pallais 2009) there is also evidence of more limited or no effects (e.g., Angrist, Oreopoulos and Williams 2010, Fryer 2010, Bettinger 2008 and Sharma 2010). This paper evaluates a pay for performance scheme from a setting not studied before: performance bonuses in language training for immigrants. The experiment is unique in the sense that it tests how financial rewards affect basic human capital accumulation among adults and because it is an incentive program targeted at immigrants. The lack of economic and social integration among the immigrant population is a major concern for policy makers throughout most of the industrialized world and host country language proficiency is generally considered a key factor in promoting economic as well as political and social inclusion. There is plenty of evidence that the labor market rewards such skills1. Many countries therefore spend substantial resources on language training for immigrants. Whether costs are considered too high or the perceived benefits are seen as too low is hard to tell, but it is a fact that many immigrants never come to master the host country language (Tubergen and Kalmijn 2005 and Rooth and Åslund, 2006).2 Our data come from a Swedish policy pilot implemented within the already existing Swedish language tuition program for immigrants in 2009–2010. Municipalities which had expressed an interest in participating in the pilot were matched into pairs, and then allocated to treatment and control by pair-wise randomization. In treated municipalities, migrants passing a bonus rewarding course within fifteen months after immigration but no later than a year after the course start were awarded up to SEK 12,000 (about 1,350 Euros). The data used include all immigrants since 2006 and we are able to investigate both enrollment and performance effects, as well as heterogeneous effects in terms of 1 See, for example, Bleakley and Chin (2004), Chiswick and Miller (2002), Carnevale and Lowell (2001), Chiswick and Miller (2010), and Carliner (1999) for the US, Dustmann and Fabbri (2003) for the UK, Dustmann (1994) and Dustmann and Van Soest (2002) for Germany, Chiswick and Miller (1995) for Australia, Chiswick (1998) for Israel. The list is not exhaustive. Early work includes McManus, Gould and Welch (1983), Borjas (1984), Carliner (1980), Tainer (1988) and Kossoudji (1988). Swedish evidence is given in Rooth and Åslund (2006). 2 This