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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.

Suggested Citation

  • Christopher Ferrall, 2012. "Explaining and Forecasting Results of the Self-sufficiency Project," Review of Economic Studies, Oxford University Press, vol. 79(4), pages 1495-1526.
  • Handle: RePEc:oup:restud:v:79:y:2012:i:4:p:1495-1526
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    File URL: http://hdl.handle.net/10.1093/restud/rds008
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    1. John Kennan & James R. Walker, 2011. "The Effect of Expected Income on Individual Migration Decisions," Econometrica, Econometric Society, vol. 79(1), pages 211-251, January.
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    6. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-1035, December.
    7. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching 0209001, EconWPA.
    8. 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.
    9. Christopher Ferrall, 2005. "Solving Finite Mixture Models: Efficient Computation in Economics Under Serial and Parallel Execution," Computational Economics, Springer;Society for Computational Economics, vol. 25(4), pages 343-379, June.
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    Cited by:

    1. Marc K. Chan & Robert A. Moffitt, 2018. "Welfare Reform and the Labor Market," NBER Working Papers 24385, National Bureau of Economic Research, Inc.
    2. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2015. "Evaluating search and matching models using experimental data," IZA Journal of Labor Economics, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-35, December.
    3. Schorfheide, Frank & Wolpin, Kenneth I., 2016. "To hold out or not to hold out," Research in Economics, Elsevier, vol. 70(2), pages 332-345.
    4. Esther Duflo & Rema Hanna & Stephen P. Ryan, 2012. "Incentives Work: Getting Teachers to Come to School," American Economic Review, American Economic Association, vol. 102(4), pages 1241-1278, June.
    5. Christopher Ferrall, 2002. "Estimation and Inference in Social Experiments," General Economics and Teaching 0209001, EconWPA.
    6. Marc K. Chan, 2017. "Welfare Dependence and Self-Control: An Empirical Analysis," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1379-1423.
    7. Vincent Pohl, 2014. "Medicaid and the Labor Supply of Single Mothers: Implications for Health Care Reform," Upjohn Working Papers and Journal Articles 15-222, W.E. Upjohn Institute for Employment Research.
    8. Cahuc, Pierre & Carcillo, St├ęphane & Le Barbanchon, Thomas, 2017. "The Effectiveness of Hiring Credits," IZA Discussion Papers 11248, Institute for the Study of Labor (IZA).
    9. Chan, Marc K. & Liu, Kai, 2015. "Life-Cycle and Intergenerational Effects of Child Care Reforms," IZA Discussion Papers 9377, Institute for the Study of Labor (IZA).

    More about this item

    JEL classification:

    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • J0 - Labor and Demographic Economics - - General
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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