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9. Mai 2012

Cluster-Seminar Öffentliche Finanzen und Lebenslagen

The Generalized Roy Model and The Cost-Benefit Analysis of Social Programs


9. Mai 2012


DIW Berlin im Quartier 110
Room 5.2.010
Mohrenstraße 58
10117 Berlin


Philipp Eisenhauer (ZEW Mannheim)
The standard analysis of treatment eff ects only considers the gross benefi t of treatment and does not consider the cost as perceived by the agents or the surplus arising from participation in programs (the private subjective evaluation of the program). This paper extends the analysis of Heckman and Vytlacil (1999, 2005) to identify parameters measuring the costs and net gains of arising from participation in a program within the context of a generalized Roy model. The analysis does not require that the analyst observe the subjective cost of treatment. Instead, we use information derived from agent choices about participating in a program to infer the cost of treatment as perceived by the agent. We apply our methodology to the analysis of college choice and nd that variability in net gains from attending college is mainly due to variability in the cost associated with schooling.