Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2008:6: The matching method for treatment evaluation with selective participation and ineligibles

Monica Costa Dias, Hidehiko Ichimura and Gerard J. van den Berg ()
Additional contact information
Monica Costa Dias: Institute for Fiscal Studies
Hidehiko Ichimura: University of Tokyo
Gerard J. van den Berg: Department of Economics, University Amsterdam, Postal: De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands

Abstract: The matching method for treatment evaluation does not balance selective unobserved differences between treated and non-treated. We derive a simple correction term if there is an instrument that shifts the treatment probability to zero in specific cases. Policies with eligibility restrictions, where treatment is impossible if some variable exceeds a certain value, provide a natural application. In an empirical analysis, we first examine the performance of matching versus regression-discontinuity estimation in the sharp age-discontinuity design of the NDYP job search assistance program for young unemployed in the UK. Next, we exploit the age eligibility restriction in the Swedish Youth Practice subsidized work program for young unemployed, where compliance is imperfect among the young. Adjusting the matching estimator for selectivity changes the results towards inefectiveness of subsidized work in moving individuals into employment.

Keywords: Propensity score; policy evaluation; treatment effect; regression discontinuity; selection; job search assistance; subsidized work; youth unemployment

JEL-codes: C14; C25; J64

36 pages, April 21, 2008

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