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

See all articles by Pedro Manuel Carneiro

Pedro Manuel Carneiro

University College London - Department of Economics; IZA Institute of Labor Economics

Karsten T. Hansen

Northwestern University - Department of Marketing

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)

Date Written: April 2003

Abstract

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

Carneiro, Pedro Manuel and Hansen, Karsten T. and Heckman, James J., Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice (April 2003). IZA Discussion Paper No. 767. Available at SSRN: https://ssrn.com/abstract=403943

Pedro Manuel Carneiro (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Karsten T. Hansen

Northwestern University - Department of Marketing ( email )

Kellogg School of Management
2001 Sheridan Rd.
Evanston, IL 60208
United States

James J. Heckman

University of Chicago - Department of Economics ( email )

1126 East 59th Street
Chicago, IL 60637
United States
773-702-0634 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

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American Bar Foundation

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Institute for the Study of Labor (IZA)

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Bonn, D-53072
Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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