Evaluating the Welfare State

James Heckman and Jeffrey Smith

No 6542, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A variety of criteria are relevant for evaluating alternative policies in democratic societies composed of persons with diverse values and perspectives. In this paper, we consider alternative criteria for evaluating the welfare state, and the data required to operationalize them. We examine sets of identifying assumptions that bound, or exactly produce, these alternative criteria given the availability of various types of data. We consider the economic questions addressed by two widely-used econometric evaluation estimators and relate them to the requirements of a comprehensive cost-benefit analysis. We present evidence on how the inference from the most commonly used econometric evaluation estimator is modified when the direct costs of a program are fully assessed, including the welfare costs of the taxes required to support the program. Finally, we present evidence of the empirical inconsistency of alternative criteria derived from evaluations based on on self-selection and attrition decisions, and on self-reported evaluations from questionnaires when applied to a prototypical job training program.

JEL-codes: C93 H43 (search for similar items in EconPapers)
Date: 1998-05
New Economics Papers: this item is included in nep-pbe, nep-pol and nep-pub
Note: PE
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Citations: View citations in EconPapers (122)

Published as Econometrics and Economic Theory in the 20th Century: The Ragnar Frisch Centennial, Strom, Steiner, ed., Cambridge: Cambridge University Press, 1998, pp. 241-318.

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