Working Paper: NBER ID: w10283
Authors: Jeremy Lise; Shannon Seitz; Jeffrey Smith
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.
Keywords: No keywords provided
JEL Codes: J2; I38; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| SSP (H55) | Increased Employment for IA Recipients (J68) |
| Increased Employment for IA Recipients (J68) | Decreased Re-Employment Rates for UI Recipients (J65) |
| SSP (H55) | Lower Equilibrium Wages for IA Recipients (J31) |
| SSP (H55) | Increased Transition Rates into IA from UI (J68) |
| SSP (H55) | Entry and Delayed Exit Effects (C41) |
| Increased Employment for IA Recipients (J68) | Lower Starting Wages (J31) |
| Wages for Other Workers (J39) | Slight Increase due to Increased Value of IA (F29) |