Predict Long-Run Impacts?
James J. Heckman
Carolyn J. Heinrich
This chapter culminates the analysis in this volume by examining two closely related questions.1 The first of these is posed in the title: Do performance measures based on short-run outcomes predict long-run program impacts? If they do, then performance management systems like those in JTPA and WIA will provide incentives that enhance the economic efficiency of program operations. Put differently, if existing performance measures predict long-term impacts, then their use provides some benefits to weigh against the costs documented in earlier chapters. The second question concerns the efficiency costs of cream skimming induced by the performance standards. As noted in Chapter 3, depending on the relationship between the performance measures and net program impacts, cream skimming may be efficiency increasing (a positive relationship), efficiency decreasing (a negative relationship), or neutral (no relationship).
We address these questions in two different ways. The two analyses build on different identifying assumptions but both utilize the experimental data from the National JTPA Study (NJS) introduced in Chapter 6. The two analyses represent different ways of dealing with the fact that, absent additional assumptions, experimental data do not provide impacts for individuals, only average impacts for groups. Both strategies have important limitations, which we discuss in detail later on in the chapter.
Both methods yield the same basic findings. First, the short-run labor market outcomes commonly used as performance measures do