quick job entry or long term human capital development the dynamic effects of alternative training schemes this study evaluates and compares the eectiveness of two alternative training schemes for the unemployed short job search oriented training and long human capital oriented training we investigate the impact dynamics of these pro grams considering both unemployment and employment duration our analysis uses a rich administrative longitudinal data set for germany where both programs were implemented at the same time our estimation strategy flexibly accounts for dy namic selection on observables and unobservables as well as heterogeneous treatment eects the results indicate that short term training schemes can be an eective tool to reduce unemployment in the long run in particular if participation occurs early during unemployment long term training schemes increase the average du ration of employment spells more strongly than short term training however they increase the expected unemployment duration if they are started early during un employment this negative short run impact of long term training is an important driver of its overall eectiveness

the empirical content of the roy model this paper clarifies and extends the classical roy model of self selection and earnings inequality the original roy model based on the assumption that log skills are normally distributed is shown to imply that pursuit of comparative advantage in a free market reduces earnings inequality compared to the earnings distribution that would result if workers were randomly assigned to sectors aggregate log earnings are right skewed even if one sectoral distribution is left skewed most major implications of the log normal roy model survive if differences in skills are log concave however few implications of the model survive if skills are generated from more general distributions we consider the identifiability of the roy model from data on earnings distributions the normal theory version is identifiable without regressors or exclusion restrictions sectoral distributions can be identified knowing only the aggregate earnings distribution for general skill distributions the model is not identified and has no empirical content with sufficient price variation the model can be identified from multimarket data cross sectional variation in regressors can substitute for price variation in restoring empirical content to the roy model

evaluating welfare reform in the united states this paper reviews the economic literature on welfare reform over the 1990s a brief summary of the policy changes is followed by a discussion of the methodological techniques that analyze the effects of these changes on outcomes the paper then critically reviews the econometric and experimental literature on caseload changes labor force changes poverty and income changes and family formation changes a growing body of evidence suggests that recent policy changes have influenced economic behavior and well being one particular set of new style welfare programs seems to show especially promising results with significantly increased work and earnings and reduced poverty

measuring the incentives to learn in colombia using new quantile regression approaches abstract this paper employs newly developed quantile regression techniques to investigate a policy that could differentially affect students performance the colombian vouchers were assigned using lotteries and were renewable as long as the students maintained satisfactory academic progress this second aspect of the program may provide incentives for low attainment students to work harder the evidence supports the hypothesis that incentives could account for the impact of the vouchers including lower repetition rate the effect of the vouchers is largest in the lower tail of the educational attainment distribution a possibility that was conjectured by others but has not yet been confirmed empirically the evidence suggests that the incentive effect of the program increases weak students test scores by at least 0 1 standard deviations roughly the score gain associated to a half year of school learning

bounding the labor supply responses to a randomized welfare experiment a revealed preference approach we study the impact of connecticut s jobs first jf welfare reform experiment on the labor supply decisions of a sample of welfare applicants and recipients although the experiment identies the distribution of choices made in the absence and presence of reform each woman s counterfactual choice is unknown we show that economic theory restricts the set of counterfactual choices compatible with each woman s actual choice we use these restrictions to develop bounds on the frequency of intensive and extensive margin responses to reform our results indicate that the jf experiment led some women to work and others to reduce their earnings

the demand for and impact of learning hiv status this paper evaluates an experiment in which individuals in rural malawi were randomly assigned monetary incentives to learn their hiv results after being tested distance to the hiv results centers was also randomly assigned without any incentive 34 percent of the participants learned their hiv results however even the smallest incentive doubled that share using the randomly assigned incentives and distance from results centers as instruments for the knowledge of hiv status sexually active hiv positive individuals who learned their results are three times more likely to purchase condoms two months later than sexually active hiv positive individuals who did not learn their results however hiv positive individuals who learned their results purchase only two additional condoms than those who did not there is no significant effect of learning hiv negative status on the purchase of condoms

assessing the case for social experiments rs ecent academic debates pit two alternative approaches to policy evaluation against one another the first is the experimental approach based on the random assignment of accepted program applicants to a recipient or treatment group and a non recipient or control group the second is the nonexperimental or econometric approach that uses a variety of microdata sources statistical methods and behavioral models to compare the outcomes of participants in social programs with those of nonparticipants the central question addressed in this paper is whether or not randomized social experiments aid in securing answers to basic questions about the evaluation of social programs there are many distinct and complementary approaches to the study of the impact of public policy including full general equilibrium analysis of policy impacts tinbergen 1956 auerbach and kotlikoff 1987 shoven and whalley 1992 kydland and prescott 1991 and less ambitious partial equilibrium microeconomic structural research programs such as those designed to estimate the impact of taxes on labor supply both approaches offer answers to many interesting counterfactual policy questions but their credibility rests critically on the quality of the empirical input used to generate their answers

counterfactual decomposition of changes in wage distributions using quantile regression we propose a method to decompose the changes in the wage distribution over a period of time in several factors contributing to those changes the method is based on the estimation of marginal wage distributions consistent with a conditional distribution estimated by quantile regression as well as with any hypothesized distribution for the covariates comparing the marginal distributions implied by different distributions for the covariates one is then able to perform counterfactual exercises the proposed methodology enables the identification of the sources of the increased wage inequality observed in most countries specifically it decomposes the changes in the wage distribution over a period of time into several factors contributing to those changes namely by discriminating between changes in the characteristics of the working population and changes in the returns to these characteristics we apply this methodology to portuguese data for the period 1986 1995 and find that the observed increase in educational levels contributed decisively towards greater wage inequality copyright 2005 john wiley sons ltd

oil price shocks economic policy uncertainty and industry stock returns in china asymmetric effects with quantile regression abstract this paper investigates the impact of crude oil shocks and china s economic policy uncertainty on stock returns at different locations on the return distributions based on monthly data from 1995 1 to 2016 3 we address this issue by employing the quantile regression technique this approach enables a more detailed investigation in different market circumstances namely bearish normal and bullish markets empirical results indicate that the effects of oil price shocks and economic policy uncertainty are asymmetric and highly related to stock market conditions moreover both the nexus of oil and economic policy uncertainty stock are changed at the onset of a crisis specially rising oil prices have greater negative effects on stock returns when stock markets are bullish extreme higher quantiles before a crisis whereas the effects are significantly positive under different market conditions after the onset of the crisis falling oil prices lower stock returns when stock markets are bullish and normal before the crisis whereas lower stock returns under different market conditions except extreme bullish after the onset of the crisis these findings might be related to the optimistic or pessimistic investor sentiments and investors might become more frightened after the crisis

punitive sanctions and the transition rate from welfare to work in the netherlands the average exit rate out of welfare is dramatically low most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency if they do not then a sanction in the form of a temporary benefit reduction can be imposed this article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients we find that the imposition of sanctions substantially increases the individual transition rate from welfare to work

estimating the effects of a time limited earnings subsidy for welfare leavers in the self sufficiency project ssp welfare demonstration members of a randomly assigned treatment group could receive a subsidy for full time work the subsidy was available for 3 years but only to people who began working full time within 12 months of random assignment a simple optimizing model suggests that the eligibility rules created an establishment incentive to find a job and leave welfare within a year of random assignment and an entitlement incentive to choose work over welfare once eligibility was established building on this insight we develop an econometric model of welfare participation that allows us to separate the two effects and estimate the impact of the earnings subsidy on welfare entry and exit rates among those who achieved eligibility the combination of the two incentives explains the time profile of the experimental impacts which peaked 15 months after random assignment and faded relatively quickly our findings suggest that about half of the peak impact of ssp was attributable to the establishment incentive despite the extra work effort generated by ssp the program had no lasting impact on wages and little or no long run effect on welfare participation

what mean impacts miss distributional effects of welfare reform experiments labor supply theory predicts systematic heterogeneity in the impact of recent welfare reforms on earnings transfers and income yet most welfare reform research focuses on mean impacts we investigate the importance of heterogeneity using random assignment data from connecticut s jobs first waiver which features key elements of post 1996 welfare programs estimated quantile treatment effects exhibit the substantial heterogeneity predicted by labor supply theory thus mean impacts miss a great deal looking separately at samples of dropouts and other women does not improve the performance of mean impacts we conclude that welfare reform s effects are likely both more varied and more extensive than has been recognized

interest rates and currency prices in a two country world abstract this paper is a theoretical study of the determination of prices interest rates and currency exchange rates set in an infinitely lived two country world which is subject both to stochastic endowment shocks and to monetary instability formulas are obtained for pricing all equity claims nominally denominated bonds and currencies and these formulas are related to earlier closely related results in the theories of money finance international trade

is universal child care leveling the playing field abstract we assess the case for universal child care programs in the context of a norwegian reform which led to a large scale expansion of subsidized child care we use non linear difference in differences methods to estimate the quantile treatment effects of the reform we find that the effects of the child care expansion were positive in the lower and middle parts of the earnings distribution of exposed children as adults and negative in the uppermost part we complement this analysis with local linear regressions of the child care effects by family income we find that most of the gains in earnings associated with the universal child care program relate to children of low income parents whereas upper class children actually experience a loss in earnings in line with the differential effects by family income we estimate that the universal child care program substantially increased intergenerational income mobility to interpret the estimated heterogeneity in child care effects we examine the mediating role of educational attainment and cognitive test scores and show that our estimates are consistent with a simple model where parents make a tradeoff between current family consumption and investment in children taken together our findings could have important implications for the policy debate over universal child care programs suggesting that the benefits of providing subsidized child care to middle and upper class children are unlikely to exceed the costs our study also points to the importance of universal child care programs in explaining differences in earnings inequality and income mobility across countries and over time

in search of the exchange risk premium a six currency test assuming mean variance optimization abstract a number of authors examining deviations of actual rates of currency depreciation from forward discounts have claimed to find evidence of risk premiums if these deviations are indeed partly due to risk premiums rather than being entirely due to expectational errors then they should be systematically related to those variables on which risk premiums are thought to depend finance theory tells us that if investors optimize with respect to mean and variance the risk premium depends in a specific way on 1 the supplies of assets denominated in the various currencies 2 the variance covariance matrix of the rates of return and 3 the coefficient of risk aversion the null hypothesis of this paper is that the coefficient of risk aversion is zero countries assets are perfect substitutes and risk premiums are nonexistent the alternative hypothesis is that rates of return are systematically related to asset supplies by a macroeconomic portfolio balance function the maximum likelihood technique used dominates previous attempts to find such a relationship in that the parameters of the portfolio balance function are constrained to depend on the variance covariance matrix as the finance theory says they should on the other hand the technique also dominates previous applications of the finance theory in that the expected returns are allowed to vary over time as the macroeconomic portfolio balance theory says they should the paper s finding is a statistical inability to reject the null hypothesis for a portfolio of six currencies although this could be due to low power in the test

who benefits from job corps a distributional analysis of an active labor market program summary using recently developed econometric techniques to estimate quantile treatment effects qte and experimental data we examine the impact of job corps on earnings distribution our results indicate a great deal of heterogeneity in the effects of job corps the qtes show an increasing pattern along the earnings distribution with much more pronounced differences at the upper quantiles for males whites and ages 20 24 moreover we find the qtes to be very small at quantiles below the median for males ages 16 17 and 18 19 and non resident students we propose strong economic conditions and skill hypotheses to explain the heterogeneity observed over the earnings distribution copyright 2013 john wiley sons ltd

discretionary policy and multiple equilibria in lq re models we study discretionary equilibria in dynamic linear quadratic rational expectations models in contrast to the assumptions that pervade this literature we show that these models do have multiple equilibria in some situations we demonstrate the existence of multiple discretionary equilibria by example we investigate general properties of discretionary equilibria and discuss implications for numerical algorithms

rdp 8708 risk effects versus monetary effects in the determination of short term interest rates economic theory offers two distinct approaches to the modeling of interest rates at the microeconomic level interest rates are modeled as an outcome of intertemporal optimization by investors so that real interest rates are determined entirely by the real variables that characterize risk at the macroeconomic level short term behavior of interest rates is usually thought of as being governed by the money demand function this paper tests a model that encompasses both views using data for four countries the results suggest that risk factors are empirically insignificant in explaining interest rate behavior copyright 1989 by the london school of economics and political science

consistent testing for stochastic dominance under general sampling schemes we propose a procedure for estimating the critical values of the extended kolmogorov smirnov tests of stochastic dominance of arbitrary order in the general k prospect case we allow for the observations to be serially dependent and for the first time we can accommodate general dependence amongst the prospects which are to be ranked also the prospects may be the residuals from certain conditional models opening the way for conditional ranking we also propose a test of prospect stochastic dominance our method is based on subsampling and we show that the resulting tests are consistent and powerful against some n 1 2 local alternatives we also propose some heuristic methods for selecting subsample size and demonstrate in simulations that they perform reasonably we describe an alternative method for obtaining critical values based on recentring the test statistic and using full sample bootstrap methods we compare the two methods in theory and in practice

treatment effect heterogeneity in theory and practice instrumental variables iv methods identify internally valid causal effects for individuals whose treatment status is manipulable by the instrument at hand inference for other populations requires homogeneity assumptions this paper outlines a theoretical framework that nests causal homogeneity assumptions these ideas are illustrated using sibling sex composition to estimate the effect of childbearing on economic and marital outcomes the application is motivated by american welfare reform the empirical results generally support the notion of reduced labour supply and increased poverty as a consequence of childbearing but evidence on the impact of childbearing on marital stability and welfare use is more tenuous

set identification in models with multiple equilibria we propose a computationally feasible way of deriving the identified features of models with multiple equilibria in pure or mixed strategies it is shown that in the case of shapley regular normal form games the identified set is characterized by the inclusion of the true data distribution within the core of a choquet capacity which is interpreted as the generalized likelihood of the model in turn this inclusion is characterized by a finite set of inequalities and efficient and easily implementable combinatorial methods are described to check them in all normal form games the identified set is characterized in terms of the value of a submodular or convex optimization program efficient algorithms are then given and compared to check inclusion of a parameter in this identified set the latter are illustrated with family bargaining games and oligopoly entry games copyright 2011 oxford university press

the impact of piped water provision on infant mortality in brazil a quantile panel data approach abstract we examine the impact of piped water on the under 1 infant mortality rate imr in brazil using a recently developed econometric procedure for the estimation of quantile treatment effects with panel data the provision of piped water in brazil is highly correlated with other observable and unobservable determinants of imr the latter leading to an important source of bias instruments for piped water provision are not readily available and fixed effects to control for time invariant correlated unobservables are invalid in the simple quantile regression framework using the quantile panel data procedure in chen and khan chen s khan s semiparametric estimation of non stationary censored panel model data models with time varying factor econometric theory 2007 forthcoming our estimates indicate that the provision of piped water reduces infant mortality by significantly more at the higher conditional quantiles of the imr distribution than at the lower conditional quantiles except for cases of extreme underdevelopment these results imply that targeting piped water intervention toward areas in the upper quantiles of the conditional imr distribution when accompanied by other basic public health inputs can achieve significantly greater reductions in infant mortality

the economic reward for studying economics undergraduate advisors in economics departments suggest that the study of economics is good preparation for a variety of careers including economics consulting analysis and administration and they argue that economics is a solid prelaw or pre mba major in this article we provide some empirical evidence about each of these contentions we find that among college graduates who do not earn advanced degrees economics majors generally earn more than similar individuals with other majors we show also that among individuals who pursue graduate degree programs in business and law economics majors earn more than undergraduate majors in most other academic disciplines jel j31

what is the price of prevention new evidence from a field experiment how does increasing access to treatment affect the demand for preventive testing in this paper we present results from a field experiment in nigeria in which we offered cervical cancer screening to women at randomly chosen prices to test our hypothesis we also offered women a lottery where the payoff was a subsidy towards the cost of cervical cancer treatment conditional upon a diagnosis of cervical cancer we find that women randomly selected to receive the conditional cancer treatment subsidy were about 4 percentage points more likely to take up screening than those in the control group we also show that reducing the price of screening by 10 cents increased take up by about 1 percentage point these results offer compelling evidence that the optimal set of subsidies to increase take up of preventive testing in developing countries must include subsidies towards treatment costs in addition to price subsidies

subsidised training and youth employment distinguishing unobserved heterogeneity from state dependence in labour market histories using the 1990 2 wave of the french labour force survey to study the employment histories of young people i consider transitions between six labour market states employment contracts whether permanent or temporary unemployment training education and non participation i use a fixed effect estimator in a dynamic multinomial logit model which can accommodate any form of unobserved heterogeneity in levels this analysis can be extended to markov processes of any order i relate heterogeneity components to individual and family characteristics by using simulated maximum likelihood methods these procedures allow evaluation of the effects training schemes have on youth employment histories

sugarcane outgrowers in ethiopia forced to remain poor contract farming is often seen as a panacea to many of the challenges faced by agricultural production in developing countries given the large heterogeneity of contract farming arrangements it is debatable whether all kinds of contract farming arrangements offer benefits to participating smallholders we apply matching methods to analyze the effects of a public sugarcane outgrower scheme in ethiopia participation in the outgrower scheme significantly reduces the income and asset stocks of outgrowers who contributed irrigated land to the outgrower scheme while the effect was insignificant for outgrowers who contributed rain fed land we provide several explanations and discuss policy implications

a note on the measurement of equity duration and convexity the appropriate measure of equity duration and by extension convexity is a controversial matter in 1986 leibowitz presented empirical duration measures that are considerably shorter than those derived from a traditional dividend discount model a class of dividend discount models developed by hurley and johnson is used to try to reconcile the difference the values derived for equity duration are intermediate between the leibowitz and traditional measures these models overcome the standard criticism of dividend discount models by allowing for realistic patterns of future dividend growth corresponding models of equity convexity developed by johnson are used to derive equity convexity

making the most out of programme evaluations and social experiments accounting for heterogeneity in programme impacts the conventional approach to social programme evaluation focuses on estimating mean impacts of programmes yet many interesting questions regarding the political economy of programmes the distribution of programme benefits and the option values conferred on programme participants require knowledge of the distribution of impacts or features of it this paper presents evidence that heterogeneity in response to programmes is empirically important and that classical probability inequalities are not very informative in producing estimates or bounds on the distribution of programme impacts we explore two methods for supplementing the information in these inequalities based on assumptions about participant decision making processes and about the strength in dependence between outcomes in the participation and non participation states dependence is produced as a consequence of rational choice by participants we test for stochastic rationality among programme participants and present and implement methods for estimating the option values of social programmes

land values in a newly zoned city the introduction of a new zoning ordinance to chicago in 1923 offers a natural experiment that allows us to determine the effects of zoning on relative land value growth rates policymakers claimed at the time that land use zoning would raise aggregate land values by reducing negative externalities associated with mixed land use after controlling for initial land use and the endogeneity of zoning decisions we find that residential zoning led to higher land value growth rates than commercial zoning

can variation in subgroups average treatment effects explain treatment effect heterogeneity evidence from a social experiment we assess whether welfare reform affects earnings only through mean impacts that are constant within but vary across subgroups this is important because researchers interested in treatment effect heterogeneity typically focus on estimating mean impacts that only vary across subgroups using a novel approach to simulating treatment group earnings under the constant mean impacts within subgroup model we find this model does a poor job of capturing treatment effect heterogeneity for connecticut s jobs first welfare reform experiment notably ignoring within group heterogeneitywould lead one to miss evidence that treatment effects are consistent with basic labor supply theory

is the quantity quality trade off a trade off for all none or some abstract although the theoretical trade off between the quantity and quality of children is well established empirical evidence supporting such a causal relationship particularly on child health is limited we use two measures of child health to assess the quantity quality trade off across the entire distribution using data from the indonesia family life survey and controlling for the potential endogeneity of child quantity we find modest statistically meaningful evidence of a causal trade off

estimating heterogeneous takeup and crowd out responses to existing medicaid income limits and their nonmarginal expansions we use a switching probit model and the income limit based structure of medicaid eligibility for children to estimate treatment effects of nonmarginal medicaid expansions on medicaid takeup private insurance coverage and crowd out as well as crowd out for those eligible for medicaid under rules already in place many of these estimates are not found in existing work on public insurance and cannot be calculated with the linear probability model used by previous work in this literature we provide an estimation approach that is straightforward to implement yet yields precise treatment effects

total portfolio duration a new perspective on asset allocation the concept of duration has proved to be a valuable tool for gauging the sensitivity of a bond portfolio to movements in interest rates by balancing the duration of a fixed income portfolio against the duration of the stream of liabilities it is funding one creates a portfolio that is immunized against interest rate changes but what if the portfolio contains stocks as well as bonds the interest rate risk of an equity portfolio can be estimated from a measure of the correlation between stock and bonds by using variance parameters routinely used in conventional asset allocation procedures the correlation is used in conjunction with a measure of bond market duration to derive an estimate of the duration of the stock market these durations together with a portfolio s allocations to stocks and bonds and the beta of the stock component may be used to obtain a measure of total portfolio duration what the duration measure tells us in general is that a total portfolio s sensitivity to interest rate mo

output the stock market and interest rates this paper develops a simple model of the determination of output the stock market and the term structure of interest rates the model is an extension of the is lm model and borrows from it the assumption that output is determined by aggregate demand and that the price level can only adjust over time to its equilibrium value however whereas the is lm emphasizes the interaction between the interest rate and output this model emphasizes the interaction between asset values and output asset values rather than the interest rate are the main determinants of aggregate demand and output current and anticipated output and income are in turn the main determinants of asset values it is this interaction that the model intends to capture its goal is to characterize the joint response of asset values and output to changes in the environment such as changes or announcement of changes in monetary and fiscal policy as the above brief description makes clear anticipations are central to the story the assumption made in this paper will be one of rational expectations the paper is organized as follows section i describes the model and sections ii iv characterize the behavior of the economy under the extreme but convenient assumption that prices are fixed forever sections v and vi extend the analysis to the case where prices adjust over time to their equilibrium value

semiparametric estimation of regression models for panel data linear models with error components are widely used to analyse panel data some applications of these models require knowledge of the probability densities of the error components existing methods handle this requirement by assuming that the densities belong to known parametric families of distributions typically the normal distribution this paper shows how to carry out nonparametric estimation of the densities of the error components thereby avoiding the assumption that the densities belong to known parametric families the nonparametric estimators are applied to an earnings model using data from the current population survey the model s transitory error component is not normally distributed use of the nonparametric density estimators yields estimates of the probability that individuals with low earnings will become high earners in the future that are much lower than the estimates obtained under the assumption of normally distributed error components

treatment effects with unobserved heterogeneity a set identification approach we propose the sharp identifiable bounds of the potential outcome distributions using panel data we allow for the possibility that statistical randomization of treatment assignments is not achieved until unobserved heterogeneity is properly controlled for we use certain stationarity assumptions to obtain the sharp bounds our approach allows for dynamic treatment decisions where the current treatment decisions may depend on the past treatments or the past observed outcomes as an empirical illustration we study the effect of smoking during pregnancy on infant birthweight we find that for the group of switchers the infant birthweight of a smoking mother is first order stochastically dominated by that of a nonsmoking mother

the use and usefulness of performance measures in the public sector the paper focuses on the empirical evidence on the use and usefulness of performance measures in the public sector it begins with consideration of the features of the public sector which make the use of performance measures complex the issues of multiple principals and multiple tasks it discusses the form that performance measures may take the use made of these measures and the responses that individuals may make to them empirical examples from the fields of education and health with a focus on the usa and uk are examined there is clear evidence of responses to such measures some of these responses improve efficiency but others do not and fall into the category of gaming generally there has been little assessment of whether performance measures bring about improvements in service the paper ends with consideration of how such measures should be used and what measures are useful to collect

introduction to the distribution of earnings and of individual output by a d roy this article summarises the lasting contribution of roy s 1950 fundamental paper roy a d 1950 the distribution of earnings and of individual output economic journal vol 60 239 pp 489 505

designing programs for heterogeneous populations the value of covariate information normative judgments embodied in the american legal system mandate that in certain respects public policy should treat all members of the population uniformly nevertheless the legal system permits many forms of disparate treatment of the population the medicare program provides health care benefits to persons age 65 and older but not to younger americans the federal welfare to work program known as tanf permits states to treat welfare recipients differentially placing some in job training and others in basic skills classes judicial sentencing guidelines variously permit or require judges to sentence convicted offenders differentially based on past convictions public high schools track students making class assignments vary with past student achievement in these and other settings where legal constraints do not preclude disparate treatment society may choose among many alternative treatment rules a program could mandate uniform treatment of the population or require that treatment vary in particular ways with observable covariates of the persons treated e g age in the case of medicare past convictions in the case of sentencing or permit agents of society e g judges welfare case managers school counselors to make their own treatment choices subject to specified constraints research on program evaluation can help to inform public policy through efforts to learn the consequences of alternative treatment rules in particular evaluation research should seek to characterize how treatment response varies across the population if we learn that all persons respond to treatment in much the same manner then the best policy may be one that treats all persons uniformly however if we learn that treatment response varies with observable covariates of the persons treated then society may be able to do better by designing programs in which treatment varies appropriately with these covariates for example society may be able to lower recidivism among criminal offenders by sentencing some offenders to prison and others to probation it may be able to increase the life cycle earnings of welfare recipients by placing some in job training and others in basic skills classes in these and many other cases the key to success is to determine which persons should receive which treatments regrettably evaluation research has had little to say about how treatment response varies with observable covariates of the persons treated a common practice especially in observational studies has been to assume that all persons respond to treatment in the same manner studies that are sensitive to possible variation in treatment response may report findings by race or gender or age but they rarely disaggregate the population more finely as a consequence policymakers seeking to design programs for heterogeneous populations have to speculate on the consequences of alternative treatment rules this short article draws on my recent research manski 1997 2000a b to argue that increased attention to observable variation in treatment response would enhance the value of evaluation research

a causal interpretation of extensive and intensive margin effects in generalized tobit models the usual decomposition of effects in corner solution models into extensive and intensive margins is generally incompatible with a causal interpretation this paper proposes a decomposition based on the joint distribution of potential outcomes which is meaningful in a causal sense the difference between decompositions can be substantial and yield diametrically opposed results as shown in a standard tobit model example in a generalized tobit application exploring the effect of reducing firm entry regulation on bilateral trade flows between countries estimates suggest that using the usual decomposition would overstate the contribution of the extensive margin by around 15

evaluating the employment impact of a mandatory job search program this paper exploits area based piloting and age related eligibility rules to identify treatment effects of a labor market program the new deal for young people in the u k a central focus is on substitution displacement effects and on equilibrium wage effects the program includes extensive job assistance and wage subsidies to employers we find that the impact of the program significantly raised transitions to employment by about 5 percentage points the impact is robust to a wide variety of nonexperimental estimators however we present some evidence that this effect may not be as large in the longer run jel j18 j23 j38

on the distribution of exchange rate regime treatment effects on international trade abstract this paper provides evidence of heterogeneous treatment effects on trade for six different types of exchange rate regime transitions utilizing data on 218 643 country pair year observations all together previous research mainly focused on the currency union effect on trade and widely assumed that country pairs with identical observable characteristics receive the same effect we test the hypothesis of a homogeneous treatment effect empirically and find substantive statistical support for the presence of effect heterogeneity moreover we characterize the probability distribution of effect heterogeneity among observationally equivalent country pairs by way of a random coefficients model we estimate selected features of the empirical distributions of the treatment effects for each of the six different types of exchange rate regime transitions under two different sets of assumptions about the probability distribution of effect heterogeneity our findings suggest that the immediate effects on trade from switching to an exchange rate regime different from the one in the outset have wide waists and exhibit large positive extreme values we estimate the probability of two countries to experience an immediate positive effect on the growth of bilateral trade due to the adoption of any new exchange rate regime tighter or not to be approximately one half

heterogeneous impacts of conditional cash transfers evidence from nicaragua abstract in the last decade the most popular policy tool used to increase human capital in developing countries has been the conditional cash transfer program a large literature has shown significant mean impacts on schooling health and child labor this paper examines heterogeneous effects using random assignment data from the red de proteccion social in rural nicaragua using interactions between the targeting criteria and the treatment indicator estimates suggest that children located in more impoverished localities experienced a larger impact of the program on schooling in 2001 but this finding is reversed in 2002 estimated quantile treatment effects indicate that there is considerable heterogeneity in the impacts of the program on the distribution of food expenditures as well as total expenditures in particular households at the lower end of the expenditure distribution experienced a smaller increase in expenditures this study also presents evidence of the rank invariance assumption to hel

substitution and dropout bias in social experiments a study of an influential social experiment this paper considers the interpretation of evidence from social experiments when persons randomized out of a program being evaluated have good substitutes for it and when persons randomized into a program drop out to pursue better alternatives using data from an experimental evaluation of a classroom training program we document the empirical importance of control group substitution and treatment group dropping out evidence that one program is ineffective relative to close substitutes is not evidence that the type of service provided by all of the programs is ineffective although that is the way experimental evidence is often interpreted

real exchange rate overshooting and the output cost of bringing down inflation implementing a gradualist policy of monetary contraction in an open economy with a freely floating exchange rate but with nominal inertia in domestic labor costs can lead to prompt and substantial changes in the nominal and real exchange rate one of the virtues claimed for such exchange rate overshooting however is its immediate effect on the price level and so on domestic wage and price inflation in this paper we show that in a model which is super neutral and has nominal inertia in both the level of labor costs and their trend or core rate of growth this early overshooting of the exchange rate does not succeed in cutting the output costs of reducing steady state inflation those output and unemployment costs which are initially avoided by over valuing the currency have to be paid later when this overvaluation is corrected relative to other policies which achieve the same effect on steady state inflation exchange rate overshooting brings inflation down more quickly this abstract was borrowed from another version of this item

distributional impacts of the self sufficiency project a large literature has been concerned with the impacts of recent welfare reforms on income earnings transfers and labor force attachment while one strand of this literature relies on observational studies conducted with large survey sample data sets a second makes use of data generated by experimental evaluations of changes to means tested programs much of the overall literature has focused on mean impacts in this paper we use random assignment experimental data from canada s self sufficiency project ssp to look at impacts of this unique reform on the distributions of income earnings and transfers ssp offered members of the treatment group a generous subsidy for working full time quantile treatment effect qte estimates show there was considerable heterogeneity in the impacts of ssp on the distributions of earnings transfers and total income this heterogeneity would be missed by looking only at average treatment effects moreover these heterogeneous impacts are consistent with the predictions of labor supply theory during the period when the subsidy is available the ssp impact on the earnings distribution is zero for the bottom half of the distribution the quantiles of the ssp earnings distribution are higher for much of the upper third of the distribution except at the very top where the quantiles of the earnings distribution are the same under either program or possibly lower under ssp further during the period when ssp receipt was possible the impacts on the quantiles of the distributions of transfer payments income assistance plus the subsidy and total income earnings plus transfers are also different at different points of the distribution in particular positive impacts on the quantiles of the transfer distribution are concentrated at the lower end of the transfer distribution while positive impacts on the quantiles of the income distribution are concentrated in the upper end of the income distribution impacts of ssp on these distributions were essentially zero after the subsidy was no longer available

using experiments to evaluate performance standards what do welfare to work demonstrations reveal to welfare reformers this paper examines how experimental demonstrations can be used to inform planners about the efficacy of social programs in light of a performance standard the problem is illustrated by considering the situation faced by state governments attempting to design programs to meet the new federal welfare to work standards data from experimental evaluations alone allow only limited inferences about the labor market outcomes of welfare recipients combined with prior information on the selection process however these data are informative suggesting either that the long run federal requirements cannot be met or that these standards will only be met under special circumstances

a general test for distortions in performance measures abstract results from the incentive literature suggest that performance measures are often distorted eliciting dysfunctional and unintended responses the existence of these responses however is difficult to demonstrate in practice because this behavior is typically hidden from the researcher we present a simple model showing that one can test for the existence of distortions by estimating the change in the association between a performance measure and the true goal of the organization with the measure s introduction using data from a public sector organization we find evidence consistent with the existence of distortions we draw implications for the selection of performance measures