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Alternative approaches to evaluation in empirical microeconomics

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  • Richard Blundell
  • Monica Costa Dias

Abstract

This paper reviews a range of the most popular policy evaluation methods in empirical microeconomics: social experiments, natural experiments, matching methods, instrumental variables, discontinuity design and control functions. It discusses the identification of both the traditionally used average parameters and more complex distributional parameters. In each case, the necessary assumptions and the data requirements are considered. The adequacy of each approach is discussed drawing on the empirical evidence from the education and labor market policy evaluation literature. We also develop an education evaluation model which we use to carry through the discussion of each alternative approach. A full set of STATA datasets are provided free online which contain Monte-Carlo replications of the various specifications of the education evaluation model. There are also a full set of STATA .do files for each of the estimation approaches described in the paper. The .do-files can be used together with the datasets to reproduce all the results in the paper.

Suggested Citation

  • Richard Blundell & Monica Costa Dias, 2008. "Alternative approaches to evaluation in empirical microeconomics," CeMMAP working papers 26/08, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:26/08
    DOI: 10.1920/wp.cem.2008.2608
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    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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