Using Performance Standards to Evaluate Social Programs with Incomplete Outcome Data: General Issues and Application to a Higher Education Block Grant Program

The basic idea of program evaluation is both simple and appealing. Program outcomes are measured and compared to some minimum performance standard or threshold. In practice, however, evaluation is quite difficult. Two fundamental problems of outcome measurement must be addressed. The first, which we call the problem of auxiliary outcomes, is that we do not observe outcome of interest. The second, which we call the problem of counterfactual outcomes, is that we do not observe the threshold standard. This paper examines how performance standards should be set and applied in the face of these problems in measuring outcomes. In particular, we consider the problem of evaluating the new World Bank-sponsored Quality of Under-graduate Education (QUE) program. This competitive block grant program is to be judged by the program's effects on student outcomes, not by the particular ways in which grantee depart-ments use their funds. Our central message is that the proper way to implement standards varies with the prior information that the evaluator can credibly bring to bear to compensate for incomplete outcome data. An evaluator, confronted with the auxiliary and counter-factual outcomes problems, should combine the available data with credible assumptions on treatment and outcomes. Given this information, the performance of a program may be deemed acceptable, unacceptable, or indeterminate.