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Treatment Effects for Discrete Outcomes when Responses to Treatment Vary Among Observationally Identical Persons: An Application to Norwegian ..

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  • Arild Aakvik
  • James J. Heckman
  • Edward J. Vytlacil

Abstract

This paper formulates an econometric framework for studying the impact of interventions on discrete outcomes when responses to treatment vary among observationally identical persons. Using a latent variable model that can be linked to well-posed economic models, we show how to define and interpret the average treatment effects, the average effect of treatment on the treated, the marginal treatment effect and the distribution of treatment effects for discrete outcomes. To estimate these parameters and the distribution of treatment effects, we formulate and estimate a discrete choice model with unobservables generated by a factor structure model. We apply our methods to evaluate the effect of Norwegian Vocational Rehabilitation training programs on employment outcomes for women. We find that applicants to these programs who participate in active training have a 4.6% higher employment rate than nonparticipants. When we control for the observable characteristics of applicants, we find that the average treatment effects falls to 4.1%. When we control for the unobservables characteristics of applicants, the average treatment effect falls to -1.4% and effect of treatment on the treated is -11%. We also find evidence of substantial heterogeneity in response to training.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Technical Working Papers with number 0262.

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Date of creation: Sep 2000
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Publication status: published as Aakvik, Arild, James J. Heckman and Edward J. Vytlacil. "Estimating Treatment Effects For Discrete Outcomes When Responses To Treatment Vary: An Application To Norwegian Vocational Rehabilitation Programs," Journal of Econometrics, 2005, v125(1-2,Mar-Apr), 15-51.
Handle: RePEc:nbr:nberte:0262

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References

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  1. James Heckman & Hidehiko Ichimura & Jeffrey Smith & Petra Todd, 1998. "Characterizing Selection Bias Using Experimental Data," Econometrica, Econometric Society, vol. 66(5), pages 1017-1098, September.
  2. Joshua D. Angrist, 2000. "Estimation of Limited-Dependent Variable Models with Dummy Endogenous Regressors: Simple Strategies for Empirical Practice," NBER Technical Working Papers 0248, National Bureau of Economic Research, Inc.
  3. Card, David & Sullivan, Daniel G, 1988. "Measuring the Effect of Subsidized Training Programs on Movements in and out of Employment," Econometrica, Econometric Society, vol. 56(3), pages 497-530, May.
  4. Poirier, Dale J., 1980. "Partial observability in bivariate probit models," Journal of Econometrics, Elsevier, vol. 12(2), pages 209-217, February.
  5. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May.
  6. James J. Heckman & Jeffrey A. Smith, 1995. "Assessing the Case for Social Experiments," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 85-110, Spring.
  7. Ridder, G, 1986. "An Event History Approach to the Evaluation of Training, Recruitment and Employment Programmes," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(2), pages 109-26, April.
  8. James J. Heckman & Lance Lochner & Christopher Taber, 1998. "General Equilibrium Treatment Effects: A Study of Tuition Policy," NBER Working Papers 6426, National Bureau of Economic Research, Inc.
  9. Joshua D. Angrist & Guido W. Imbens, 1995. "Identification and Estimation of Local Average Treatment Effects," NBER Technical Working Papers 0118, National Bureau of Economic Research, Inc.
  10. Heckman, James & Singer, Burton, 1984. "A Method for Minimizing the Impact of Distributional Assumptions in Econometric Models for Duration Data," Econometrica, Econometric Society, vol. 52(2), pages 271-320, March.
  11. Heckman, James J & Honore, Bo E, 1990. "The Empirical Content of the Roy Model," Econometrica, Econometric Society, vol. 58(5), pages 1121-49, September.
  12. Gary Burtless, 1995. "The Case for Randomized Field Trials in Economic and Policy Research," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 63-84, Spring.
  13. James J. Heckman, 1989. "Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: The Case of Manpower Training," NBER Working Papers 2861, National Bureau of Economic Research, Inc.
  14. Gritz, R. Mark, 1993. "The impact of training on the frequency and duration of employment," Journal of Econometrics, Elsevier, vol. 57(1-3), pages 21-51.
  15. Burt S. Barnow, 1987. "The Impact of CETA Programs on Earnings: A Review of the Literature," Journal of Human Resources, University of Wisconsin Press, vol. 22(2), pages 157-193.
  16. Ham, John C & LaLonde, Robert J, 1996. "The Effect of Sample Selection and Initial Conditions in Duration Models: Evidence from Experimental Data on Training," Econometrica, Econometric Society, vol. 64(1), pages 175-205, January.
  17. James Heckman & Lance Lochner & Christopher Taber, 1998. "Explaining Rising Wage Inequality: Explanations With A Dynamic General Equilibrium Model of Labor Earnings With Heterogeneous Agents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 1-58, January.
  18. Joshua D. Angrist & Kathryn Graddy & Guido W. Imbens, 1995. "Non-Parametric Demand Analysis with an Application to the Demand for Fish," NBER Technical Working Papers 0178, National Bureau of Economic Research, Inc.
  19. James J. Heckman & Edward J. Vytlacil, 2000. "Local Instrumental Variables," NBER Technical Working Papers 0252, National Bureau of Economic Research, Inc.
  20. Robert J. LaLonde, 1995. "The Promise of Public Sector-Sponsored Training Programs," Journal of Economic Perspectives, American Economic Association, vol. 9(2), pages 149-168, Spring.
  21. Heckman, James J. & Vytlacil, Edward J., 2000. "The relationship between treatment parameters within a latent variable framework," Economics Letters, Elsevier, vol. 66(1), pages 33-39, January.
  22. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
  23. Edward Vytlacil, 2002. "Independence, Monotonicity, and Latent Index Models: An Equivalence Result," Econometrica, Econometric Society, vol. 70(1), pages 331-341, January.
  24. Xiaohong Chen & James J. Heckman & Edward Vytlacil, 2000. "Identification and SQRT N Efficient Estimation of Semiparametric Panel Data Models with Binary Dependent Variables and a Latent Factor," Econometric Society World Congress 2000 Contributed Papers 1567, Econometric Society.
  25. Bjorklund, Anders & Moffitt, Robert, 1987. "The Estimation of Wage Gains and Welfare Gains in Self-selection," The Review of Economics and Statistics, MIT Press, vol. 69(1), pages 42-49, February.
  26. Stephen H. Bell & Larry l. Orr & John D. Blomquist & Glen G. Cain, 1995. "Program Applicants as a Comparison Group in Evaluating Training Programs: Theory and a Test," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number pacg.
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Citations

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Cited by:
  1. Armin Falk & Rafael Lalive & Josef Zweimüller, . "The Sucess of Job Applications: A New Approach to Program Evaluation," IEW - Working Papers 131, Institute for Empirical Research in Economics - University of Zurich.
  2. Viktor Steiner & Tobias Hagen, 2002. "Was kann die Aktive Arbeitsmarktpolitik in Deutschland aus der Evaluationsforschung in anderen europäischen Ländern lernen?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(2), pages 189-206, 05.
  3. Pedro Carneiro, 2003. "Evaluating Education Policies when the Rate of Return Varies Across Individuals," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 516-529.
  4. Coelli, Michael B. & Green, David A. & Warburton, William P., 2007. "Breaking the cycle? The effect of education on welfare receipt among children of welfare recipients," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1369-1398, August.
  5. Thomas Andren & Daniela Andren, 2006. "Assessing the employment effects of vocational training using a one-factor model," Applied Economics, Taylor & Francis Journals, vol. 38(21), pages 2469-2486.
  6. Zhang, Tao, 2003. "Identifying treatment effects of active labour market programmes for Norwegian adults," Memorandum 26/2003, Oslo University, Department of Economics.
  7. Lokshin, Michael & Glinskaya, Elena, 2008. "The effect of male migration for work on employment patterns of females in nepal," Policy Research Working Paper Series 4757, The World Bank.
  8. Falk, Armin & Lalive, Rafael & Zweimüller, Josef, 2004. "The Success of Job Applications: A New Approach to Programme Evaluation," CEPR Discussion Papers 4461, C.E.P.R. Discussion Papers.
  9. Aakvik, Arild & Salvanes, Kjell G & Vaage, Kjell, 2003. "Measuring Heterogeneity in the Returns to Education in Norway Using Educational Reforms," CEPR Discussion Papers 4088, C.E.P.R. Discussion Papers.
  10. Andrén , Daniela & Andrén, Thomas, 2002. "Assessing the Employment Effects of Labor Market Training Programs in Sweden," Working Papers in Economics 70, University of Gothenburg, Department of Economics.
  11. Melayne Morgan McInnes & Orgul Demet Ozturk & Suzanne McDermott & Joshua R. Mann, 2010. "Does supported employment work?," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 29(3), pages 506-525.
  12. Fan, Yanqin & Park, Sang Soo, 2009. "Partial identification of the distribution of treatment effects and its confidence sets," MPRA Paper 37148, University Library of Munich, Germany.
  13. Markus Jochmann & Winfried Pohlmeier, 2004. "The Causal Effect of Overqualification on Earnings : Evidence from a Bayesian Approach," Working Papers of the Research Group Heterogenous Labor 04-06, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
  14. Mark Dusheiko & Hugh Gravelle & Rowena Jacobs, 2004. "The effect of practice budgets on patient waiting times: allowing for selection bias," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 941-958.

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