Treatment Evaluation With Selective Participation and Ineligibles

Abstract

Matching methods for treatment evaluation based on a conditional independence assumption do not balance selective unobserved differences between treated and nontreated. 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 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 toward making subsidized work detrimental in moving individuals into employment.

KEY WORDS:

• Matching methods
• Policy evaluation
• Propensity score
• Regression discontinuity
• Selection
• Subsidized work
• Treatment effect
• Youth unemployment

Acknowledgments

We thank the editor, an anonymous associate editor, two anonymous referees, Richard Blundell, Xavier de Luna, Barbara Sianesi, and Petra Todd, for useful comments. We also thank Louise Kennerberg and Barbara Sianesi for help with the Swedish data. We gratefully acknowledge financial support from the ESRC and from IFAU-Uppsala. Costa Dias is thankful to Fundacao para a Ciencia e Tecnologia and the European Social Fund for financial support. Ichimura thanks support from the JSPS Basic Research fund.