Using the MVPF to Allocate Treatment Under Imperfect Compliance and Supply-Side Constraints

Antonio Dalla-Zuanna () and Kai Liu ()
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Antonio Dalla-Zuanna: Bank of Italy
Kai Liu: University of Cambridge

No 18259, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper shows how the Marginal Value of Public Funds (MVPF) can guide treatment allocation to improve social welfare. Under budget constraints, the optimal treatment targets individuals with MVPFs above a threshold that minimizes the opportunity cost of treatment. Using experimental data, we show that prioritizing high-MVPF groups under tight budgets can double Head Start’s social benefits compared to random assignment. Analyzing joint allocation across early (Head Start) and late (Job Corps) skill investment programs, we find that exclusive investment in early interventions is not optimal unless substantially higher welfare weights are placed on young children.

Keywords: budget constraints; treatment allocation; Marginal Value of Public Funds (MVPF); welfare maximization (search for similar items in EconPapers)
JEL-codes: D61 H43 I26 I38 J68 (search for similar items in EconPapers)
Date: 2025-11
New Economics Papers: this item is included in nep-lab
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