Rajeev H. Dehejia

Propensity Score-Matching Methods For Nonexperimental Causal Studies

This paper considers causal inference and sample selection bias in nonexperimental settings in which (i) few units in the nonexperimental comparison group are comparable to the treatment units, and (ii) selecting a subset of comparison units similar to the treatment units is difficult because units must be compared across a high-dimensional set of pre-treatment characteristics. We discuss the use of propensity score-matching methods, and implement them using data from the National Supported Work experiment. Following LaLonde (1986), we pair the experimental treated units with nonexperimental comparison units from the CPS and PSID, and compare the estimates of the treatment effect obtained using our methods to the benchmark results from the experiment. For both comparison groups, we show that the methods succeed in focusing attention on the small subset of the comparison units comparable to the treated units and, hence, in alleviating the bias due to systematic differences between the treated and comparison units.

Booms, Busts, and Babies' Health

This paper documents a counter-cyclical pattern in the health of children, and examines whether this pattern is due to selection among women choosing to give birth or to behavioral changes. We study the relationship between the unemployment rate at the time of a baby?s conception and parental characteristics, parental behaviors, and babies? health. Using national data from the Natality Files from 1975 onward, we find that babies conceived in times of high unemployment have a reduced incidence of low and very low birth weight, fewer congenital malformations, and a reduced rate of post-neonatal mortality. These health improvements are attributable both to selection (changes in the type of mothers that conceive during recessions) and to changes in behavior during recessions. Black mothers tend to be higher socio-economic status (as measured by education and marital status) in times of high unemployment, whereas white mothers are less educated. Health behaviors also appear to improve among all pregnant women, although we cannot reject the hypothesis that all health improvements among black women are due to selection.

Why Should We Care About Child Labor? The Education, Labor Market, and Health Consequences of Child Labor

Despite the extensive literature on the determinants of child labor, the evidence on the consequences of child labor on outcomes such as education, labor, and health is limited. We evaluate the causal effect of child labor participation among children in school on these outcomes using panel data from Vietnam and an instrumental variables strategy. Five years subsequent to the child labor experience we find significant negative impacts on education, and also find a higher probability of wage work for those young adults who worked as children while attending school. We find few significant effects on health.

THE EFFECT OF AUTOMOBILE INSURANCE AND ACCIDENT LIABILITY LAWS ON TRAFFIC FATALITIES

This paper investigates the incentive effects of automobile insurance, compulsory insurance laws, and no‐fault liability laws on driver behavior and traffic fatalities. We analyze a panel of 50 U.S. states and the District of Columbia for 1970–98, a period in which many states adopted compulsory insurance regulations and/or no‐fault laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no‐fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6 percent). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no‐fault liability systems have significant negative effects on traffic fatalities.

Child labor: the role of financial development and income variability across countries.

In this article, we examine the link between child labor and financial development using cross‐country data. We show that child labor and financial development display a significant negative relationship, which is particularly strong in the sample of low‐income countries and is robust for a wide range of specifications and estimators, including fixed‐effects and instrumental variables. We identify a plausible channel through which financial development affects child labor, as we find that income variability has a sizable, positive impact on child labor in countries where financial markets are underdeveloped, although this is not the case when financial markets are developed. Our results suggest that policies aimed at widening access to credit could be effective in reducing the extent of child labor.

Do Financial Incentives Affect Fertility

This paper investigates how fertility responds to changes in the price of a marginal child and in household income. We construct a large, individual-level panel data set of married Israeli women during the period 1999-2005 that contains fertility histories and detailed controls. We exploit variation in Israels child subsidy program to identify changes in the price of a marginal child (using changes in the subsidy for a marginal child) and to instrument for household income (using changes in the subsidy for infra-marginal children). We find a significant and positive price effect on fertility: the mean level of marginal child subsidy produces a 7.8 percent increase in fertility. There is a positive effect within all religious and ethnic subgroups, including the ultra-Orthodox Jewish population, whose social and religious norms discourage family planning. There is also a significant price effect on fertility among women who are close to the end of their lifetime fertility, suggesting that at least part of the price effect is due to a reduction in total fertility. As expected, the child subsidy has no effect in the upper range of the income distribution. Finally, consistent with the predictions of Becker (1960) and Becker and Tomes (1976), we find that the income effect is small in magnitude and is negative at low income levels and positive at high levels.

Financial development and pathways of growth: State branching and deposit insurance laws in the United States, 1900-1940

This paper studies the effect of state‐level banking regulation on financial development and on components of state‐level growth in the United States from 1900 to 1940. We use these banking laws to assess the findings of a large recent literature that has argued that financial development contributes to economic growth. We contend that the institutional mechanism leading to financial development is important in determining its consequences and that some types of financial development can even retard economic growth. For the United States from 1900 to 1940, we argue that the financial expansion induced by expanded bank branching accelerated the mechanization of agriculture and spurred growth in manufacturing. In contrast, financial expansions induced by state deposit insurance had negative consequences for both the agricultural and manufacturing sectors.

The Consequences of Child Labor: Evidence from Longitudinal Data in Rural Tanzania

This paper exploits a unique longitudinal data set from Tanzania to examine the consequences of child labor on education, employment choices, and marital status over a 10-year horizon. Shocks to crop production and rainfall are used as instrumental variables for child labor. For boys, the findings show that a one-standard-deviation (5.7 hour) increase in child labor leads 10 years later to a loss of approximately one year of schooling and to a substantial increase in the likelihood of farming and of marrying at a younger age. Strikingly, there are no significant effects on education for girls, but there is a significant increase in the likelihood of marrying young. The findings also show that crop shocks lead to an increase in agricultural work for boys and instead lead to an increase in chore hours for girls. The results are consistent with education being a lower priority for girls and/or with chores causing less disruption for education than agricultural work. The increased chore hours could also account for the results on marriage for girls.

Was There a Riverside Miracle? A Hierarchical Framework for Evaluating Programs With Grouped Data

This article discusses the evaluation of programs implemented at multiple sites. Two frequently used methods are pooling the data or using fixed effects (an extreme version of which estimates separate models for each site). The former approach ignores site effects. The latter incorporates site effects but lacks a framework for predicting the impact of subsequent implementations of the program (e.g., would a new implementation resemble Riverside?). I present a hierarchical model that lies between these two extremes. Using data from the Greater Avenues for Independence demonstration, I demonstrate that the model captures much of the site-to-site variation of the treatment effects but has less uncertainty than estimating the treatment effect separately for each site. I also show that when predictive uncertainty is ignored, the treatment impact for the Riverside sites is significant, but when predictive uncertainty is considered, the impact for these sites is insignificant. Finally, I demonstrate that the model extrapolates site effects with reasonable accuracy when the site being predicted does not differ substantially from the sites already observed. For example, the San Diego treatment effects could have been predicted based on their site characteristics, but the Riverside effects are consistently underpredicted.

Services Growth in India: A Look Inside the Black Box

It is now widely recognized that the pattern of growth in India in recent years has been an unconventional one. Virtually all labor-abundant developing countries—such as Taiwan, South Korea, and China—saw the shares of manufactures in GDP and employment rise and those of agriculture fall during their high-growth phases. In contrast, during its recent high-growth phase, India has witnessed the share of manufactures in GDP stagnate despite a decline in the share of agriculture in it. Moreover, the movement of workers out of the agricultural sector has been extremely piecemeal, with the absolute number of workers in agriculture still rising due to the rising size of the workforce. An additional diff erence between the experiences of countries like Taiwan, South Korea, and China and that of India has been with respect to labor-intensive manufactures. While the former set of countries saw these products’ share of GDP and employment rapidly rise, India experienced no such change during the high-growth phase. In India, services have grown more rapidly than manufactures. Th e somewhat exceptional pattern of growth in India poses several puzzles. First, why have manufactured goods in general and labor-intensive products in particular responded sluggishly to the liberalizing reforms since 1991? Second, why have services grown more rapidly in the post-reform period? And fi nally, why has the transition from a primarily agrarian and rural to an urban and modern structure been slower in India? Specifi cally, why has the movement of labor out of agriculture into industry been slower than in other fast-growing developing countries? To be sure, economic reforms, including opening to trade and foreign investment and freeing up domestic controls, have helped improve the OUP UNCORRECTED PROOF – FIRST-PROOF, 06/19/12, NEWGEN