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Explaining and Forecasting Results of the Self-sufficiency Project

  • Christopher Ferrall

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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File URL: http://hdl.handle.net/10.1093/restud/rds008
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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. Christopher Ferrall, 2005. "Solving Finite Mixture Models: Efficient Computation in Economics Under Serial and Parallel Execution," Computational Economics, Society for Computational Economics, vol. 25(4), pages 343-379, June.
  2. Lise, Jeremy & Seitz, Shannon & Smith, Jeffrey A., 2003. "Equilibrium Policy Experiments and the Evaluation of Social Programs," IZA Discussion Papers 758, Institute for the Study of Labor (IZA).
  3. 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, vol. 96(5), pages 1384-1417, December.
  4. 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, vol. 37(3), pages 600-622.
  5. Hanming Fang & Dan Silverman, 2004. "Time-inconsistency and Welfare Program Participation: Evidence from the NLSY," Cowles Foundation Discussion Papers 1465, Cowles Foundation for Research in Economics, Yale University.
  6. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  7. 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.
  8. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching 0209001, EconWPA.
  9. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  10. Keane, Michael & Moffitt, Robert, 1998. "A Structural Model of Multiple Welfare Program Participation and Labor Supply," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(3), pages 553-89, August.
  11. David Card & Philip Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Early Findings from the Canadian Self Sufficiency Project," Working Papers 738, Princeton University, Department of Economics, Industrial Relations Section..
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