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Stochastic Dominance and Demographic Policy Evaluation: A Critique

Listed author(s):
  • Cordoba, Juan Carlos
  • Liu, Xiying

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.

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Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers Archive with number 36117.

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Date of creation: 14 Apr 2013
Handle: RePEc:isu:genres:36117
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