Ex Ante Evaluation of Social Programs

This paper discusses methods for evaluating the impacts of social programs prior to their implementation. Ex ante evaluation is useful for designing programs that achieve some optimality criteria, such as maximizing impact for a given cost. This paper illustrates the use of behavioral models in predicting the impacts of hypothetical programs in a way that is not functional form dependent. The programs considered are programs that operate by affecting the budget constraint, such as wage subsidy programs, conditional cash transfer programs, and income support programs. In some cases, the behavioral model justifies a completely nonparametric estimation strategy, even when there is no direct variation in the policy instrument. In other cases, stronger assumptions are required to evaluate a program ex ante. We illustrate the application of ex ante evaluation methods using data from the PROGRESA school subsidy randomized experiment in Mexico. We assess the effectiveness of the ex ante prediction method by comparing predictions of program impacts to the impacts measured under the randomized experiment. The subsamples pertain to girls and boys aged 12-15. For the girls, the predicted impacts are fairly similar to the actual impacts, both in magnitude and in replicating the age patterns, with larger impacts observed at higher ages. For boys, the predicted impacts tend to overstate the actual impacts. The ex-ante evaluation method is also used to predict the effects of counterfactual programs that include changes to the subsidy schedule and an unconditional income transfer.