Beyond Treatment Effects: Estimating the Relationship between Neighborhood Poverty and Individual Outcomes in the Mto Experiment

46 Pages Posted: 5 Feb 2005

See all articles by Jeffrey B. Liebman

Jeffrey B. Liebman

Harvard University - Harvard Kennedy School (HKS); National Bureau of Economic Research (NBER)

Lawrence F. Katz

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Jeffrey R. Kling

Government of the United States of America - Congressional Budget Office (CBO); National Bureau of Economic Research (NBER)

Date Written: August 2004

Abstract

Several important social science literatures hinge on the functional relationship between neighborhood characteristics and individual outcomes. Although there have been numerous non-experimental estimates of these relationships, there are serious concerns about their reliability because individuals self-select into neighborhoods. This paper uses data from HUD's Moving to Opportunity (MTO) randomized housing voucher experiment to estimate the relationship between neighborhood poverty and individual outcomes using experimental variation. In addition, it assesses the reliability of non-experimental estimates by comparing them to experimental estimates. We find that our method for using experimental variation to estimate the relationship between neighborhood poverty and individual outcomes - instrumenting for neighborhood poverty with site-by-treatment group interactions - produces precise estimates in models in which poverty enters linearly. Our estimates of nonlinear and threshold models are not precise enough to be conclusive, though many of our point estimates suggest little, if any, deviation from linearity. Our non-experimental estimates are inconsistent with our experimental estimates, suggesting that non-experimental estimates are not reliable. Moreover, the selection pattern that reconciles the experimental and non-experimental results is complex, suggesting that common assumptions about the direction of bias in non-experimental estimates may be incorrect.

Keywords: Economics - Economic and Econometric Theory, Economics - Microeconomics, Housing¸ Urban Development and Transportation, Welfare / Health Care/ Social Policy

Suggested Citation

Liebman, Jeffrey B. and Katz, Lawrence F. and Kling, Jeffrey, Beyond Treatment Effects: Estimating the Relationship between Neighborhood Poverty and Individual Outcomes in the Mto Experiment (August 2004). KSG Working Paper No. RWP04-036, Available at SSRN: https://ssrn.com/abstract=630803 or http://dx.doi.org/10.2139/ssrn.630803

Jeffrey B. Liebman (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

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Lawrence F. Katz

Harvard University - Department of Economics ( email )

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HOME PAGE: http://www.economics.harvard.edu/faculty/katz/katz

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Jeffrey Kling

Government of the United States of America - Congressional Budget Office (CBO) ( email )

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National Bureau of Economic Research (NBER)

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