Abstract

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Manpower training programs seek to reduce unemployment and poverty by increasing the work-related skills, human capital and employability of the poor and disadvantaged. A great deal of attention has been paid in the literature to estimating the impacts, or returns, to these programs. Much less attention has been devoted to how training agencies assign participants to training programs, and how these allocation decisions vary with agency resources, the initial skill levels of participants and the prevailing labor market conditions. This paper models the training assignment problem faced by welfare agencies, deriving empirical implications regarding aggregate training policies and testing these implications using data from Welfare-to-Work training programs run by California counties during the 1990s. I find that county welfare agencies do not seem to follow a simple returns-maximization model in their training assignment decisions. The results show that, as suggested by political economy models, political variables have a strong effect on training policies, specifically with respect to human capital development training.