IZA DP No. 767: Estimating Distributions of Treatment Effects with an Application to the Returns to Schooling and Measurement of the Effects of Uncertainty on College Choice
published in: International Economic Review, 2003, 44 (2), 361-422
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.
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