Student employment subsidies are one of
the largest types of federal employment subsidies, and one of the oldest forms
of student aid. Yet it is unclear
whether they help or harm students' long term outcomes.
This paper presents a framework that decomposes
overall effects into a weighted average of effects for marginal and
inframarginal workers. The authors then
develop an application of propensity scores, which we call
conditional-counterfactual matching, in which we estimate the overall impact,
and the impact under two distinct counterfactuals: working at an unsubsidized job, or not working at all.
Finally, thet estimate
the effects of the largest student employment subsidy program--Federal
Work-Study (FWS)--for a broad range of participants and outcomes.
The results suggest that about half of
FWS participants are inframarginal workers, for whom FWS reduces hours worked
and improves academic outcomes, but has little impact on future
employment. For students who would
not have worked otherwise, the pattern of effects reverses. With the exception of first-year GPA,
we find scant evidence of negative effects of FWS for any outcome or
subgroup. However, positive
effects are largest for lower-income and lower-SAT subgroups, suggesting there
may be gains to improved targeting of funds.
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