How can one evaluate whether a government labour market programme such as the New Deal, or a subsidy to education such as the EMA is actually working? This course deals with the econometric and statistical tools that have been developed to estimate the causal impact on one or more outcomes of interest of any generic ‘intervention’ in the presence of selection decisions by agents – from government programmes, policies or reforms, to the returns to education, the impact of unionism on wages, or of migration on the labour market.
After introducing the ‘evaluation problem’, establishing some notation and the analysis framework, we highlight the challenges that the evaluation problem poses to the analyst before turning our attention to the empirical methods to solve it.
Each approach is discussed on a number of different levels. In particular, for each method we provide the basic intuition and discuss the assumptions needed for its validity, before using simple algebra to prove formal identification of the parameter of interest. We then highlight the question it answers and extensively discuss its strengths and weaknesses drawing from example applications in the literature. Finally, each method is implemented ‘hands-on’ on a well-known dataset during the practical Stata sessions.
Level of knowledge required: Basic econometric / statistical knowledge including a working knowledge of OLS regression. The practical part of the course will make use of Stata; although the exercises will be guided, basic familiarity with this software is recommendable.