Working Paper: NBER ID: w22585
Authors: Jesse Rothstein; Till von Wachter
Abstract: Large-scale social experiments were pioneered in labor economics, and are the basis for much of what we know about topics ranging from the effect of job training to incentives for job search to labor supply responses to taxation. Random assignment has provided a powerful solution to selection problems that bedevil non-experimental research. Nevertheless, many important questions about these topics require going beyond random assignment. This applies to questions pertaining to both internal and external validity, and includes effects on endogenously observed outcomes, such as wages and hours; spillover effects; site effects; heterogeneity in treatment effects; multiple and hidden treatments; and the mechanisms producing treatment effects. In this Chapter, we review the value and limitations of randomized social experiments in the labor market, with an emphasis on these design issues and approaches to addressing them. These approaches expand the range of questions that can be answered using experiments by combining experimental variation with econometric or theoretical assumptions. We also discuss efforts to build the means of answering these types of questions into the ex ante design of experiments. Our discussion yields an overview of the expanding toolkit available to experimental researchers.
Keywords: No keywords provided
JEL Codes: H53; I38; J22; J24; J31; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| spillover effects (F69) | complicating causal interpretation of treatment effects (C32) |
| job search assistance programs (J68) | congestion in labor market (J69) |
| congestion in labor market (J69) | reduced job-finding rates for others (J68) |
| endogenously observed outcomes (e.g., wages) (J39) | may not accurately reflect causal impact of treatments (C32) |
| understanding mechanisms behind observed effects (C90) | treatment effects may vary across populations and settings (C90) |
| large-scale social experiments (e.g., New Jersey Income Maintenance Experiment) (C93) | understanding effects of labor market policies (J48) |
| random assignment in experiments (C90) | elimination of selection bias (C52) |
| RCTs (C90) | limitations in addressing spillover effects (C31) |