Analysis and Evaluation of Public Policies

[562222]
Professor: Dr. Daniel Albalate

Department: Economic Policy and World Economic Structure

Course 2013-2014 (5th term)

Motivation

The large size of government activities in market Economies and the magnitude of
economic resources dedicated to public policy have leaded to the need of
rationalizing its design, objectives and expectations. Current economic reforms
and fiscal constraints base the need to implement the adequate use and treatment
of public resources in order to get the most of them. The opportunity cost of
government intervention limits the extent of desirable public policies. For this
reason, this need for efficiency improvements in government intervention at any
level justify efforts devoted to promote methods able to determine and evaluate
the impact of public policies. This course aims at learning why, how and when
governments apply public policies and presents the main methodologies that help
in measuring their social impacts. After this course students should be able to
analyze the objectives, processes and actors involved in public policies, and to
evaluate them according to the standard methodologies of impact measurement
available.

This course follows the following objectives and offers the following
competences to students:

1) Introduces students to the determinants of public policy decisions.

2) Learn on the design of public intervention.
3) Review the methodologies for the analysis and evaluation of public policies.
4) Present instruments to make a rational prioritization of alternative public
policies.
5) Review the empirical methods of program evaluation.
6) Analyze and learn from empirical papers that apply program evaluation
methods.
7) Undertake a project evaluation where empirical methods presented are
implemented.
Methodology
This introductory course on public policies aims at training students in the
decision making of public policy. Under this approach, we mixed theoretical and
empirical lectures, where impact evaluation methods are applied, with
presentations and discussion of papers and a final design of a public policy
evaluation project.

Content

1) Introduction to public policy.

2) Basics of economic policy design: processes, actors and institutions
3) Selection among alternatives in public policy
4) The empirical evaluation of public policies

Methods:

a. Experiments and Randomization

b. Matching
c. Differences in Differences
d. Instrumental Variables
e. Regression in Discontinuity
f. Distributional Impacts
g. Duration models
h. Cost-Benefit Analysis

5) Discussion of papers
6) Program evaluation project

Evaluation (Grades)

50% Public Policy project design (1)

25% Presentations (1) and discussion of papers.
25% One short multiple-choice test on the basics of methods presented.
Basic References
Khandker, S. Koolwal, G. and Samad, H. (2010) Handbook on impact evaluation:
Quantitative methods and practices. The World Bank.
De Rus, G. (2010) Introduction to Cost-Benefit Analysis: Looking for Reasonable
Shortcuts, Edward Elgar Publishing.

Advanced Surveys
Imbens, G. and Woolbridge, J. (2009) “Recent developments in the econometrics
of program evaluation,” Journal of Economic Literature, 47:1, pp. 5-86.

Blundell, R. and Dias, M. 2009. “Alternative approaches to evaluation in empirical

microeconomics,” Journal of Human Resources 44:3, pp. 565-640.

Papers for discussion by methodology

Randomization

Angrist, Joshua et al. 2002. Vouchers for Private Schooling in Colombia: Evidence
from a Randomized Natural Experiment. American Economic Review, 1535-1558.
LaLonde, R. (1986), Evaluating the Econometric Evaluation of Training Programs
with
Experimental Data," American Economic Review, vol. 76, 604-620.
Krueger, A. (1999), “Experimental Estimates of Education Production Functions,"
Quarterly Journal of Economics, vol. 114, 497-532.
Rosenbaum, P. R. (1995), Observational Studies. New York: Springer-Verlag.
Chapter 2.

Matching

Abadie, A. and G. W. Imbens (2006), \Large Sample Properties of Matching

Estimators
for Average Treatment Effects," Econometrica, vol. 74, 235-267.

Alecke, B., Reinkowsky, J., Mitze, T. and Unitedt, G. (2011) Does Firm Size make a
Difference? Analysing the Effectiveness of R&D Subsidies in East Germany

Dehejia, R. H. and S. Wahba (1999), \Causal Effects in Non-Experimental Studies:

Re-

Evaluating the Evaluation of Training Programs," Journal of the American Statistical

Association, vol. 94, 1053-1062.

Heckman, J. J., H. Ichimura, and C. Taber (1997): “Matching as an Econometric

Evaluation Estimator: Evidence from Evaluating a Job Training Programme”,
Review of Economic Studies, 64, 605-654.
Imbens, G.W. (2003), “Sensitivity to Exogeneity Assumptions in Program
Evaluation,"
American Economic Review (Papers & Proceedings), vol. 93(2), 126-132.

Rosenbaum, P. R., and D. B. Rubin (1983), \The Central Role of the Propensity
Score
in Observational Studies for Causal Effects," Biometrika, vol. 70, 41-55.

Rosenbaum, P. R. (1995), Observational Studies. New York: Springer-Verlag.

Chapter 3.

Rubin, D. B. (1977), “Assignment to Treatment Group on the Basis of a Covariate,"

Journal of Educational Statistics, vol. 2, 1-26.

E. Wilde and R. Hollister (2007). “How Close is Close Enough? Evaluating

Propensity Score Matching Using Data from a Class Size Reduction
Experiment.” Journal of Policy Analysis and Management 26(3), 455-477

Differences-in-Differences

Abadie, A., (2005), "Semiparametric Differences-in-Differences Estimators,"

Review of Economic Studies 72(1), 1-19.

Abadie, A. and J. Gardeazabal (2003), \The Economic Costs of Conflict: A Case

Study of the Basque Country," American Economic Review, vol. 93(1), 113-132.

Albalate, D. (2008) "Lowering Blood Alcohol Content Levels to Save Lives: The
European Experience", Journal of Policy Analysis and Management, 27(1), pp. 20-
39.

Bennear, Lori S. (2007) “Are Management-Based Regulations Effective: Evidence

from State Pollution Prevention Programs,” Journal of Policy Analysis and
Management, 26(2): 327-348

Card, D. (1990), “The Impact of the Mariel Boatlift on the Miami Labor Market,"
Industrial and Labor Relations Review, vol. 44, 245-257.

Card, D. and A. Krueger (1994): “Minimum Wages and Employment: A Case

Study of the Fast Food Industry”, American Economic Review, 84, 772-793.

Meyer, B., K. Viscusi and D. Durbin (1995): “Workers’ Compensation and

Injury Duration: Evidence from a Natural Experiment”, American Economic
Review, 85, 322-340.
Montalvo, J. G. (2006): “Voting After the Bombing: Can Terrorist Attacks
Change the Outcome of Democratic Elections?”, Universitat Pompeu Fabra,
unpublished.

Sebastian Galiani & Paul Gertler & Ernesto Schargrodsky, 2005."Water for Life: The
Impact of the Privatization of Water Services on Child Mortality," Journal of
Political Economy, 113(1), 83-120.

Instrumental Variables
Angrist J. D. and A. Krueger (1991), “Does Compulsory School Attendance Affect
Schooling and Earnings?," Quarterly Journal of Economics, vol. 106, 979-1014.

Angrist, J. D. (1990), “Lifetime Earnings and the Vietnam Era Draft Lottery:
Evidence from Social Security Administrative Records," American Economic
Review, vol. 80, 313-336

Angrist, Joshua D. and William N. Evans (1998)“Children and Their Parents' Labor
Supply: Evidence from Exogenous Variation in Family Size,” The American
Economic Review 88(3): 450-47

Gentzkow, M. and J. M. Shapiro (2008): “Preschool Television Viewing and

Adolescent Test Scores: Historical Evidence from the Coleman Study”, Quarterly
Journal of Economics, 123, 279-323.

Hoxby, Caroline M. “Does Competition among Public Schools Benefit Students and
Taxpayers? ,” The American Economic Review, 90(5) (Dec., 2000), 1209-1238

Regression discontinuity

Angrist, J. and V. Lavy (1999): “Using Maimonides’ Rule to Estimate the Effect
of Class Size on Scholastic Achievement”, Quarterly Journal of Economics,
114, 533-575.

Black, S., (1999), "Do Better Schools Matter? Parental Valuation of Elementary
Education," Quarterly Journal of Economics, 577-599

Dinardo, J. and D. Lee (2004) Economic Impacts of New Unionization on Private

Sector Employers: 1984–2001, The Quarterly Journal of Economics, 119 (4), 1383-
1441

Lee, D.S, and T. Lemieux (2010), “Regression Discontinuity Designs in Economics,"

Journal of Economic Literature, vol. 48, 281-355
Lemieux, T. and Milligan, K. (2008) “Incentive effects of social assistance: A
regression discontinuity approach”, Journal of Econometrics 142(2), 807-828.

Van der Klaauw, W. (2002): “Estimating the Effect of Financial Aid Offers on
College Enrollment: A Regression-Discontinuity Approach”, International
Economic Review, 43, 1249-1287.

Duration models

Abbring, J. H. and G. J. van den Berg (2003): “The nonparametric identification

of treatment effects in duration models”, Econometrica, 71, 1491-1517

Van den Berg, Gerard J & van der Klaauw, Bas & van Ours, Jan C, "Punitive
Sanctions and the Transition Rate From Welfare to Work," Journal of Labor
Economics, Vol. 22, No. 1 (January 2004), pp. 211-241

Cost-Benefit Analysis
Anthony E. Boardman and Diane Forbes (2011) “A Benefit-Cost Analysis of Private
and Semi-Private Hospital Rooms”, Journal of Benefit-Cost Analysis: Vol 2: Iss 1,
Article 3.

Chen, G. and Warburton, R. (2006) “Do Speed Cameras Produce Net Benefits?
Evidence from British Columbia, Canada”, Journal of Policy Analysis and
Management, 35(3), 661-678.

De Rus, Ginés (2011) "The BCA of HSR: Should the Government Invest in High
Speed Rail Infrastructure?," Journal of Benefit-Cost Analysis: Vol. 2: Iss. 1, Article 2.