Estimating Welfare Effects Consistent with Forward-Looking Behavior. Part I: Lessons from a Simulation Exercise
AbstractAn extensive literature in economics seeks to determine the quantitative impact of welfare benefits on economic and demographic behaviors. Most studies adopt a static choice framework to motivate their empirical specifications. The behaviors that are studied, however, have both immediate and long-term consequences. If potential welfare recipients are forward looking, they will consider these long-term consequences when making current decisions. In this paper we investigate the implications of the existence of forward-looking behavior for estimation methodology. In the companion paper that follows, we estimate the effect of welfare on those decisions adopting an empirical specification that is consistent with forward-looking behavior and interpretable within that framework.
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Bibliographic InfoArticle provided by University of Wisconsin Press in its journal Journal of Human Resources.
Volume (Year): 37 (2002)
Issue (Month): 3 ()
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