Evaluating the Welfare State

98 Pages Posted: 24 Apr 1999 Last revised: 21 May 2018

See all articles by James J. Heckman

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Jeffrey A. Smith

University of Wisconsin - Madison; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Date Written: May 1998

Abstract

A variety of criteria are relevant for evaluating alternative policies in democratic societies composed of persons with diverse values and perspectives. In this paper, we consider alternative criteria for evaluating the welfare state, and the data required to operationalize them. We examine sets of identifying assumptions that bound, or exactly produce, these alternative criteria given the availability of various types of data. We consider the economic questions addressed by two widely-used econometric evaluation estimators and relate them to the requirements of a comprehensive cost-benefit analysis. We present evidence on how the inference from the most commonly used econometric evaluation estimator is modified when the direct costs of a program are fully assessed, including the welfare costs of the taxes required to support the program. Finally, we present evidence of the empirical inconsistency of alternative criteria derived from evaluations based on on self-selection and attrition decisions, and on self-reported evaluations from questionnaires when applied to a prototypical job training program.

Suggested Citation

Heckman, James J. and Smith, Jeffrey Andrew, Evaluating the Welfare State (May 1998). NBER Working Paper No. w6542. Available at SSRN: https://ssrn.com/abstract=160690

James J. Heckman (Contact Author)

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Jeffrey Andrew Smith

University of Wisconsin - Madison

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Institute for the Study of Labor (IZA)

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Germany

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