CREAM-SKIMMER OR UNDERDOG? A CASE STUDY OF LABOR TYPE SELECTIVITY IN A RURAL LABOR TRAINING PROGRAM IN CHINA

Abstract

The mismatch between a laborer’s abilities and the goals set forth by a training program is one of the most pressing concerns for a labor training program. This paper looks at the incentives for a laborer to enter a rural labor training program and demonstrates a clear method of analyzing the participation issues using instrumental regressions on the data collected from a case study a “poverty city” in the Zhejiang province, China. This paper shows that a pre-program wage drop may induce workers of a higher caliber to enter the training program and cause a “cream-skimming” effect on its outcome because of the S-shaped labor supply curve for the rural population who live in poverty. The result of the cream-skimming effect enhances the traditional view that a pre-program wage drop may reduce “opportunity cost” to enter a training program. This extension can be handy to revise future designs of rural labor training programs.