V. Joseph Hotz

Choosing Among Alternative Nonexperimental Methods for Estimating the Impact of Social Programs: the Case of Manpower Training

The recent literature on evaluating manpower training programs demonstrates that alternative nonexperimental estimators of the same program produce a array of estimates of program impact. These findings have led to the call for experiments to be used to perform credible program evaluations. Missing in all of the recent pessimistic analyses of nonexperimental methods is any systematic discussion of how to choose among competing estimators. This paper explores the value of simple specification tests in selecting an appropriate nonexperimental estimator. A reanalysis of the National Supported Work Demonstration Data previously analyzed by proponents of social experiments reveals that a simple testing procedure eliminates the range of nonexperimental estimators that are at variance with the experimental estimates of program impact.

Conditional Choice Probabilities and the Estimation of Dynamic Models

This paper develops a new method for estimating the structural parameters of dynamic programming problems in which choices are discrete. The method reduces the computational burden of estimating such models. We show the valuation functions characterizing the expected future utility function associated with such choices often can be represented as an easily computed function of the state variables, structural parameters, and the probabilities of choosing alternative actions for states which are feasible in the future. Under certain conditions, nonparametric estimators of these probabilities can be formed from sample information on the relative frequencies of observed choices using observations with the same (or similar) state variables. Substituting the estimators for the true conditional choice probabilities in formulating optimal decision rules, we establish the consistency and asymptotic normality of the resulting structural parameter estimators. To illustrate our new method, we estimate a dynamic model of parental contraceptive choice and fertility using data from the National Fertility Survey.

Teenage Childbearing and its Life Cycle Consequences: Exploiting a Natural Experiment

We exploit a “natural experiment” associated with human reproduction to identify the causal effect of teen childbearing on the socioeconomic attainment of teen mothers. We exploit the fact that some women who become pregnant experience a miscarriage and do not have a live birth. Using miscarriages an instrumental variable, we estimate the effect of teen mothers not delaying their childbearing on their subsequent attainment. We find that many of the negative consequences of teenage childbearing are much smaller than those found in previous studies. For most outcomes, the adverse consequences of early childbearing are short-lived. Finally, for annual hours of work and earnings, we find that a teen mother would have lower levels of each at older ages if they had delayed their childbearing.

An Empirical Analysis of Life Cycle Fertility and Female Labor Supply

This paper examines household fertility and female labor supply over the life cycle. The authors investigate ho w maternal time and market inputs, and benefits children yield their parents, vary with their ages and influence female labor supply and c ontraceptive behavior. Their econometric framework combines a female labor-supply model and a contraceptive choice index function and allo ws conceptions not to be perfectly controllable. Using data from the Panel Study of Income Dynamics, they estimate these equations and tes t alternative specifications. The findings suggest that parents canno t perfectly control conceptions and variations in child care costs af fect the spacing of births. Copyright 1988 by The Econometric Society.

An Investigation of the Labor Market Earnings of Panamanian Males Evaluating the Sources of Inequality

This paper presents empirical evidence on the determinants of labor market earnings and inequality for males in Panama. Using newly available microdata, we estimate earnings equations based on the measurement framework of Mincer (1974) and compare them with those for other countries at various stages of economic development. We present evidence on two aspects of inequality in less developed economies: labor market segmentation and social stratification. We present tests of the segmentation hypothesis, including several of the dual labor market hypotheses and discuss their inherent ambiguity. We also present evidence on the importance of family background for earnings determination and educational attainment.

A simulation estimator for dynamic models of discrete choice

This paper analyses a new estimator for the structural parameters of dynamic models of discrete choice. Based on an inversion theorem due to Hotz and Miller (1993), which establishes the existence of a one-to-one mapping between the conditional valuation functions for the dynamic problem and their associated conditional choice probabilities, we exploit simulation techniques to estimate models which do not possess terminal states. In this way our Conditional Choice Simulation (CCS) estimator complements the Conditional Choice Probability (CCP) estimator of Hotz and Miller (1993). Drawing on work in empirical process theory by Pakes and Pollard (1989), we establish its large sample properties, and then conduct a Monte Carlo study of Rusts (1987) model of bus engine replacement to compare its small sample properties with those of Maximum Likelihood (ML).

Bounding Causal Effects Using Data from a Contaminated Natural Experiment: Analysing the Effects of Teenage Childbearing

In this paper, we consider what can be learned about causal effects when one uses a contaminated instrumental variable. In particular, we consider what inferences can be made about the causal effect of teenage childbearing on a teen mothers subsequent outcomes when we use the natural experiment of miscarriages to form an instrumental variable for teen births. Miscarriages might not meet all of the conditions required for an instrumental variable to identify such causal effects for all of the observations in our sample. However, it is an appropriate instrumental variable for some women, namely those pregnant women who experience a random miscarriage. Although information from typical data sources does not allow one to identify these women, we show that one can adapt results from Horowitz and Manski (1995) on identification with data from contaminated samples to construct informative bounds on the causal effect of teenage childbearing. We use these bounds to re-examine the effects of early chilbearing on the teen mothers subsequent educational and labour market attainment as considered in Hotz, McElroy and Sanders (1995a, 1995b). Consistent with their study, these bounds indicate that women who have births as teens have higher labour market earnings and hours worked compared to what they would have attained if their childbearing had been delayed.

Intertemporal Preferences and Labor Supply

In this paper, the authors examine whether nonseparable preference structures ar e important in characterizing life-cycle labor supply. Using longitud inal data on prime-age males from the Panel Study of Income Dynamics, they estimate a model of life-cycle leisure and consumption under un certainty in which intertemporal preferences are allowed to be nonsep arable in leisure. The model tests several alternative specifications considered in the literature. They investigate the robustness of the ir findings to certain forms of population heterogeneity and types of model misspecification. Across alternative specifications, the autho rs find that the standard assumption of intertemporally separable pre ferences for leisure is not consistent with the data. Copyright 1988 by The Econometric Society.

Evaluating the Differential Effects of Alternative Welfare-to-Work Training Components: A Re-Analysis of the California Gain Program

We show how data from an evaluation in which subjects are randomly assigned to some treatment versus a control group can be combined with nonexperimental methods to estimate the differential effects of alternative treatments. We propose tests for the validity of these methods. We use these methods and tests to analyze the differential effects of labor force attachment (LFA) versus human capital development (HCD) training components with data from California’s Greater Avenues to Independence (GAIN) program. While LFA is more effective than HCD training in the short term, we find that HCD is relatively more effective in the longer term.

The Responsiveness of the Demand for Condoms to the Local Prevalence of AIDS.

This paper investigates the degree to which the local prevalence of AIDS increases the demand for disease-preventing methods of contraception among young adults. Using data from the National Longitudinal Survey of Youth (NLSY-1979), we find substantial evidence that the use of condoms was quite responsive to the prevalence of AIDS in ones state of residence, and this responsiveness has been increasing over time. We present both cross-sectional and longitudinal evidence estimating that a 1 percent increase in the prevalence of AIDS increases the propensity to use a condom significantly and up to 50 percent for the most prevalence-responsive groups. Our findings lend support to the existence of a self-limiting incentive effect of epidemics-an effect that tends to be ignored in epidemiological theories of the spread of infectious diseases.