Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice
66 Pages Posted: 9 May 2003
Date Written: April 2003
This paper uses factor models to identify and estimate distributions of counterfactuals. We extend LISREL frameworks to a dynamic treatment effect setting, extending matching to account for unobserved conditioning variables. Using these models, we can identify all pairwise and joint treatment effects. We apply these methods to a model of schooling and determine the intrinsic uncertainty facing agents at the time they make their decisions about enrollment in school. Reducing uncertainty in returns raises college enrollment. We go beyond the "Veil of Ignorance" in evaluating educational policies and determine who benefits and loses from commonly proposed educational reforms.
Keywords: Policy Evaluation, Returns to Schooling, Factor Models, Counterfactual Distributions
JEL Classification: C31
Suggested Citation: Suggested Citation