Equilibrium Policy Experiments and the Evaluation of Social Programs

49 Pages Posted: 9 Feb 2004 Last revised: 6 Feb 2022

See all articles by Jeremy Lise

Jeremy Lise

University College London

Shannon Seitz

Queen's University - Department of Economics

Jeffrey A. Smith

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

Multiple version iconThere are 2 versions of this paper

Date Written: February 2004

Abstract

This paper makes three primary contributions. First, we demonstrate the usefulness of general equilibrium models as tools with which to draw policy implications for policies implemented in practice only as small-scale social experiments. Second, we illustrate the usefulness of social experiments as a tool to evaluate equilibrium models. In particular, we calibrate our model using only data on an experimental control group and from general data sets, and then use it to predict (in partial equilibrium) the outcomes experienced by an experimental treatment group. We find that it predicts these outcomes remarkably well. Third, we apply our methodology to the evaluation of the Canadian Self-Sufficiency Project (SSP), a policy providing generous financial incentives for Income Assistance (IA) recipients to obtain stable employment. This policy is similar to many other policies designed to 'make work pay' currently under debate or in place in the US, the UK and elsewhere. Our results reveal several important feedback effects associated with the SSP policy; taken together, these feedback effects reverse the cost-benefit conclusions implied by the partial equilibrium experimental evaluation.

Suggested Citation

Lise, Jeremy and Seitz, Shannon and Smith, Jeffrey Andrew, Equilibrium Policy Experiments and the Evaluation of Social Programs (February 2004). NBER Working Paper No. w10283, Available at SSRN: https://ssrn.com/abstract=495789

Jeremy Lise

University College London ( email )

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Shannon Seitz

Queen's University - Department of Economics ( email )

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Jeffrey Andrew Smith (Contact Author)

University of Wisconsin - Madison

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National Bureau of Economic Research (NBER)

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Institute for the Study of Labor (IZA)

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