Program evaluation and ethnic differences: the Pension 65 program in Peru

Koen Decancq, Javier Olivera and Erik Schokkaert

No 630047, Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: We show that the introduction of a non-contributory pension program (Pension 65) in Peru had remarkably different effects for its three main ethnic groups, i.e., Mestizo, Quechua, and Aymara. The Aymara beneficiaries of the program have experienced larger increases in health and life satisfaction compared to other Peruvians. Using a panel life satisfaction regression, we find evidence for preference heterogeneity between the Aymara and the other ethnic groups that is consistent with the observed differences. Finally, we turn to the question of how the pension program can be evaluated in a robust manner while respecting the preference heterogeneity between the ethnic groups. We propose the natural criterion that a program benefits a recipient if she is lifted to a higher indifference curve. We show that the pension program was beneficial for all groups, but that more Aymara beneficiaries were lifted to a higher indifference curve compared to other Peruvians. Our proposed criterion can be useful to evaluate programs in all cases where preference differences matter.

Pages: 46
Date: 2018-11-27
New Economics Papers: this item is included in nep-age and nep-hap
Note: paper number DPS 18.14
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Published in FEB Research Report Department of Economics

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Working Paper: Program evaluation and ethnic differences: the Pension 65 program in Peru (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:630047

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