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Stochastic Dominance and Demographic Policy Evaluation: A Critique

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  • Cordoba, Juan Carlos
  • Liu, Xiying

Abstract

Stochastic dominance (SD) is commonly used to rank income distribution and assesssocial policies. The literature argues that SD is a robust criterion for policy evaluationbecause it requires minimal knowledge of the social welfare function. We argue that,on the contrary, SD is not a robust criterion. We do this by carefully introducing mi-crofoundations into a model by Chu and Koo (1990) who use SD to provide support tofamily-planning programs aiming at reducing the fertility of the poor. We show thatfertility restrictions are generally detrimental for both individual and social welfare inspite of the fact that SD holds. Our Â…findings are an application of the LucasÂ’Critique.

Suggested Citation

  • Cordoba, Juan Carlos & Liu, Xiying, 2013. "Stochastic Dominance and Demographic Policy Evaluation: A Critique," Staff General Research Papers Archive 36117, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:36117
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    Keywords

    Fertility; Welfare; income distribution; children; demographic policies; one child policy; stochastic dominance.;

    JEL classification:

    • I - Health, Education, and Welfare
    • I1 - Health, Education, and Welfare - - Health
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • J - Labor and Demographic Economics
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • O - Economic Development, Innovation, Technological Change, and Growth
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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