Skip to main content

Does trade adjustment assistance make a difference? (Reynolds & Palatucci 2012)

Citation

Reynolds, K.M., & Palatucci, J.S. (2012). Does trade adjustment assistance make a difference? Contemporary Economic Policy, 30(1), 43-59. doi:10.1111/j.1465-7287.2010.00247.x

Highlights

  • The study’s objective was to examine the impact of the Trade Adjustment Assistance (TAA) Program on the employment and earnings of displaced workers in the manufacturing sector from 2003 to 2005.
  • The study uses a nonexperimental design to compare the outcomes of TAA recipients with a comparison group of nonrecipients who were also displaced from manufacturing jobs during the same period as the treatment group.
  • The study found no statistically significant relationship between TAA participation and employment or earnings when comparing TAA recipients with displaced workers who did not participate in TAA. However, when comparing the TAA recipients who received training with recipients who did not receive training, the study found a significant relationship between training and employment and earnings.
  • The quality of causal evidence provided in this study is low because the authors did not sufficiently account for potential differences between the study groups. This means we are not confident that estimated effects are attributable to the TAA program; other factors are likely to have contributed.

Intervention Examined

The Trade Adjustment Assistance (TAA) Program

Features of the Intervention

Established under the Trade Act of 1974 and amended through the Trade Adjustment Assistance Reform Act of 2002, the TAA Program provided aid to adult workers (18 and older) within an industry or group whose employment had been lost or reduced as a result of foreign trade competition. The available services included employment and case management services, job search assistance and allowances, training, relocation allowances, and some cash income supports. Eligible employees must have lost their jobs or have been notified of unemployment risk because of import competition or shifts in foreign production.

Features of the Study

The study authors used a statistical approach called propensity-score matching to compare the outcomes of displaced manufacturing workers receiving TAA with a demographically similar group of displaced workers who did not receive services. The variables used for matching included import sensitivity, intra-industry trade, unionization rate, average industry wage, industry layoffs, state unemployment rate, individual age, gender, education, and prior employment length. The authors used a similar approach in a separate subsample analysis to compare the outcomes of TAA recipients who received training with a comparable group of TAA recipients who did not receive training. The authors assessed impacts on both employment and earnings.

Findings

  • Employment. The study found no statistically significant relationship between participation in the TAA program and employment. However, for the subsample of TAA recipients who received training versus recipients who did not receive training, the study found that those who participated in training were 10 to 13 percentage points more likely to be reemployed than those who did not participate in training.
  • Earnings. The study found no statistically significant relationship between participation in the TAA program and earnings. However, for the subsample of TAA recipients who received training versus recipients who did not receive training, the study found that those who participated in training were 9 to 11 percentage points less likely to have an earnings loss than those who did not participate in training.

Considerations for Interpreting the Findings

Although the authors used propensity-score matching to create treatment and comparison groups with similar characteristics (including age, gender, employment, and industry-level earnings), the authors did not account for potential differences between the groups in terms of race, ethnicity, or earnings before TAA participation. Therefore, the estimated impacts could reflect differences in the characteristics of the groups rather than the true impact of the TAA program itself.

Causal Evidence Rating

The quality of causal evidence provided in this study is low because the authors did not sufficiently account for potential differences between the study groups. This means we are not confident that the estimated effects are attributable to TAA; other factors are likely to have contributed.

Additional Sources

Reynolds, K., & Palatucci, J. (2008). Does trade adjustment assistance make a difference? Unpublished manuscript.

Reviewed by CLEAR

April 2017