, Karsten Hansen
() and James Heckman
Pedro Carneiro: Department of Economics, The University of Chicago, Postal: 1126 E. 59th Street, Chicago, IL 60637
Karsten Hansen: Kellog School of Management, Northwestern University, Postal: 2001 Sheridan Rd, Evanston, IL 60208
James Heckman: Department of Economics, The University of Chicago, Postal: 1126 East 59th Street, Chicago, IL 60637
Abstract: This paper uses factor models to identify and estimate distributions of counterfactuals. We extend LISREL frameworks to a dynamic treatment effect setting, extending matching to account for unobserved conditioning variables. Using these models, we can identify all pairwise and joint treatment effects. We apply these methods to a model of schooling and determine the intrinsic uncertainty facing agents at the time they make their decisions about enrollment in school. Reducing uncertainty in returns raises college enrollment. We go beyond the “Veil of ignorance” in evaluating educational policies and determine who benefits and loses from commonly proposed educational reforms.
63 pages, January 22, 2003
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