Institute of Economic Growth
Centre for Development Economics (Delhi School of Economics)


Incorporating Social Welfare in Program: Evaluation and Treatment Choice


 Debopam Bhattacharya (University of Cambridge)


Co-author: Tatiana Komarova, London School of Economics

Friday, September 17, 2021, at 3.30 – 5.00 PM IST

The econometric literature on program-evaluation and optimal treatment-choice takes functionals of outcome-distributions as `social-welfare’ and ignores program-impacts on unobserved utilities, whereas the utility-based welfare-analysis tradition in public-finance ignores unobserved heterogeneity in individual preferences. This paper reconciles the econometric and public-finance approaches to welfare-analysis in the practically important setting of discrete-choice. We show that under unrestricted preference-heterogeneity and income-effects, the distribution of individual indirect-utility is nonparametrically identified from average demand. This enables cost-benefit analysis of non-marginal policy-interventions and their optimal targeting based on planners’ re-distributional preferences. Our methods are illustrated via empirical analyses of an experimental and an observational dataset.


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