IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Equilibrium Policy Experiments and the Evaluation of Social Programs

  • Lise, Jeremy

    ()

    (Queen's University)

  • Seitz, Shannon

    ()

    (Queen's University)

  • Smith, Jeffrey A.

    ()

    (University of Michigan)

This paper makes three contributions to the literature on program evaluation. First, we construct a model that is well-suited to conduct equilibrium policy experiments and we illustrate effectiveness of general equilibrium models as tools for the evaluation of social programs. Second, we demonstrate the usefulness of social experiments as tools to evaluate models. In this respect, our paper serves as the equilibrium analogue to LaLonde (1986) and others, where experiments are used as a benchmark against which to assess the performance of non-experimental estimators. Third, we apply our model to the study of the Canadian Self-Sufficiency Project (SSP), an experiment providing generous financial incentives to exit welfare and obtain stable employment. The model incorporates the main features of many unemployment insurance and welfare programs, including eligibility criteria and time-limited benefits, as well as the wage determination process. We first calibrate our model to data on the control group and simulate the experiment within the model. The model matches the welfare-to-work transition of the treatment group, providing support for our model in this context. We then undertake an equilibrium evaluation of the SSP. Our results highlight important feedback effects of the policy change, including displacement of unemployed individuals, lower wages for workers receiving supplement payments and higher wages for those not directly treated by the program. The results also highlight the incentives of individuals to delay exit from welfare in order to qualify for the program. Together, the feedback effects change the cost-benefit conclusions implied by the partial equilibrium experimental evaluation substantially.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://ftp.iza.org/dp758.pdf
Download Restriction: no

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 758.

as
in new window

Length: 67 pages
Date of creation: Apr 2003
Date of revision:
Handle: RePEc:iza:izadps:dp758
Contact details of provider: Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org

Order Information: Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Heckman, James J & Lochner, Lance & Taber, Christopher, 1998. "General-Equilibrium Treatment Effects: A Study of Tuition Policy," American Economic Review, American Economic Association, vol. 88(2), pages 381-86, May.
  2. David Card & Dean R. Hyslop, 2005. "Estimating the Effects of a Time-Limited Earnings Subsidy for Welfare-Leavers," Econometrica, Econometric Society, vol. 73(6), pages 1723-1770, November.
  3. Van der Linden, Bruno, 2005. "Equilibrium Evaluation of Active Labor Market Programmes Enhancing Matching Effectiveness," IZA Discussion Papers 1526, Institute for the Study of Labor (IZA).
  4. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  5. A. Smith, Jeffrey & E. Todd, Petra, 2005. "Does matching overcome LaLonde's critique of nonexperimental estimators?," Journal of Econometrics, Elsevier, vol. 125(1-2), pages 305-353.
  6. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2003. "On the Job Search and the Wage Distribution," CAM Working Papers 2004-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  7. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
  8. Carl Davidson & Stephen A. Woodbury, 1990. "The Displacement Effect of Reemployment Bonus Programs," Upjohn Working Papers and Journal Articles 90-02, W.E. Upjohn Institute for Employment Research.
  9. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
  10. Diamond, Peter A, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 217-27, April.
  11. Garry F. Barrett & Michael I. Cragg, 1998. "An Untold Story: The Characteristics of Welfare Use in British Columbia," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 165-188, February.
  12. Connolly, Helen & Gottschalk, Peter T., 2004. "Do Earnings Subsidies Affect Job Choice?," IZA Discussion Papers 1322, Institute for the Study of Labor (IZA).
  13. Christiano, Lawrence J & Eichenbaum, Martin, 1992. "Current Real-Business-Cycle Theories and Aggregate Labor-Market Fluctuations," American Economic Review, American Economic Association, vol. 82(3), pages 430-50, June.
  14. Albrecht, James & van den Berg, Gerard J & Vroman, Susan, 2004. "The knowledge lift: The Swedish adult education program that aimed to eliminate low worker skill levels," Working Paper Series 2004:17, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  15. Jeremy Lise & Shannon Seitz & Jeffrey Smith, 2006. "Evaluating Search and Matching Models Using Experimental Data," Working Papers 1074, Queen's University, Department of Economics.
  16. Browning, Edgar K, 1987. "On the Marginal Welfare Cost of Taxation," American Economic Review, American Economic Association, vol. 77(1), pages 11-23, March.
  17. James J. Heckman & Jeffrey A. Smith, 1998. "Evaluating the Welfare State," NBER Working Papers 6542, National Bureau of Economic Research, Inc.
  18. Lin, Zhengxi, 1998. "Employment Insurance in Canada: Recent Trends and Policy Changes," Analytical Studies Branch Research Paper Series 1998125e, Statistics Canada, Analytical Studies Branch.
  19. W. Erwin Diewert, 1988. "On Tax Reform," Canadian Journal of Economics, Canadian Economics Association, vol. 21(1), pages 1-40, February.
  20. Lars Peter Hansen & James J. Heckman, 1996. "The Empirical Foundations of Calibration," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 87-104, Winter.
  21. Card, D. & Michalopoulos, C. & Robins, P.K., 2001. "Measuring Wage Growth Among Former Welfare Recipients," Papers 2001-5, Gouvernement du Canada - Human Resources Development.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp758. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.