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Explaining and Forecasting Results of the Self-sufficiency Project

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  • Christopher Ferrall

Abstract

This paper studies the self-sufficiency project (SSP), a controlled randomized experiment concerning welfare, by estimating a model of endogenous skill accumulation, multidimensional job opportunities, and time-varying opportunity costs of labour market time. Methods for estimating dynamic programming models with unobserved heterogeneity are extended to account for unexpected policy interventions and endogenous sample selection and initial conditions. Parameters are identified and consistently estimated by imposing optimal responses to the exact form of the SSP earnings supplement and the experimental program, which induces exogenous variation between treatment groups and within groups as treatment progresses. The estimated model tracks primary outcomes well in and out of sample, except for underestimating trends in the sample of new welfare applicants. Predictions from counterfactual experiments run counter to non-structural results reported elsewhere, and they suggest that details of the SSP's design are critical for interpretation of results. The separate SSP Plus treatment may have longer lasting and more generalized impacts than the in-sample impacts suggest. Copyright , Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Review of Economic Studies.

Volume (Year): 79 (2012)
Issue (Month): 4 ()
Pages: 1495-1526

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Handle: RePEc:oup:restud:v:79:y:2012:i:4:p:1495-1526

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  1. M. Keane & R. Mofitt, 1995. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," Working Papers, Brown University, Department of Economics 95-4, Brown University, Department of Economics.
  2. David Card & Philip Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Early Findings from the Canadian Self Sufficiency Project," Working Papers, Princeton University, Department of Economics, Industrial Relations Section. 738, Princeton University, Department of Economics, Industrial Relations Section..
  3. Hanming Fang & Dan Silverman, 2004. "Time-inconsistency and Welfare Program Participation: Evidence from the NLSY," Cowles Foundation Discussion Papers, Cowles Foundation for Research in Economics, Yale University 1465, Cowles Foundation for Research in Economics, Yale University.
  4. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, American Economic Association, vol. 73(5), pages 1023-35, December.
  5. Christopher Ferrall, 2005. "Solving Finite Mixture Models: Efficient Computation in Economics Under Serial and Parallel Execution," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 25(4), pages 343-379, June.
  6. Kenneth I. Wolpin & Petra E. Todd, 2006. "Assessing the Impact of a School Subsidy Program in Mexico: Using a Social Experiment to Validate a Dynamic Behavioral Model of Child Schooling and Fertility," American Economic Review, American Economic Association, American Economic Association, vol. 96(5), pages 1384-1417, December.
  7. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  8. Michael P. Keane & Kenneth I. Wolpin, 2002. "Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part II: Empirical Results," Journal of Human Resources, University of Wisconsin Press, University of Wisconsin Press, vol. 37(3), pages 600-622.
  9. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching, EconWPA 0209001, EconWPA.
  10. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2005. "Equilibrium Policy Experiments and the Evaluation of Social Programs," Working Papers, Queen's University, Department of Economics 1076, Queen's University, Department of Economics.
  11. John Kennan & James R. Walker, 2003. "The Effect of Expected Income on Individual Migration Decisions," NBER Working Papers 9585, National Bureau of Economic Research, Inc.
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  1. GMM and its application outside finance
    by Chris Auld in ChrisAuld.com on 2013-10-21 19:55:38
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Cited by:
  1. Marc K Chan, 2014. "Welfare Dependence and Self-Control: An Empirical Analysis," Working Paper Series, Economics Discipline Group, UTS Business School, University of Technology, Sydney 19, Economics Discipline Group, UTS Business School, University of Technology, Sydney.
  2. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching, EconWPA 0209001, EconWPA.

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