Policy evaluation methods

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 highlighting the ‘evaluation problem’ and the challenges it poses to the analyst, we focus on the empirical methods to solve it. For each of these approaches, we give the basic intuition, discuss the assumptions needed for its validity, highlight the question it answers, discuss its strengths and weaknesses drawing from example applications in the literature and implement it ‘hands-on’ in practical Stata sessions.