Search Results

Author: Keane, Michael P.
Resulting in 18 citations.
1. Bernal, Raquel
Keane, Michael P.
Child Care Choices and Children's Cognitive Achievement: The Case of Single Mothers
Working Paper Series WP-06-09, Institute for Policy Research, Northwestern University, May 26, 2006.
Also: http://www.northwestern.edu/ipr/publications/workingpapers/wpabstracts06/wp0609.html
Cohort(s): Children of the NLSY79, NLSY79
Publisher: Institute for Policy Research - Northwestern University - (formerly Center for Urban Affairs and Policy Research)
Keyword(s): Aid for Families with Dependent Children (AFDC); Child Care; Child Support; Children, Academic Development; Maternal Employment; Peabody Individual Achievement Test (PIAT- Math); Peabody Picture Vocabulary Test (PPVT); Temporary Assistance for Needy Families (TANF)

Permission to reprint the abstract has not been received from the publisher.

The authors evaluate the effects of home inputs on children's cognitive development using the sample of single mothers from the National Longitudinal Survey of Youth (NLSY). Important selection problems arise when trying to assess the impact of maternal time and income on children's development. To deal with this, they exploit the (plausibly) exogenous variation in employment and child care use by single mothers generated by differences in welfare regulations across states and over time. In particular, the 1996 welfare reform act along with earlier state policy changes adopted under federal waivers, generated substantial increases in work and child care use. Thus, the authors construct a comprehensive set of welfare policy variables at individual and state levels and use them as instruments to estimate child cognitive ability production functions. They use local demand conditions as instruments as well.

The results indicate that the effect of child care use is negative, significant, and rather sizeable. In particular, an additional year of child care use is associated with a reduction of 2.8 percent (.15 standard deviations) in child test scores. But this general finding masks important differences across types of child care, children's ages, and maternal education. Indeed, only informal care used after the first year leads to significant reductions in child achievement. Formal care (i.e., center-based care and preschool) does not have any adverse effect on cognitive outcomes. In fact, these estimates imply that formal care has large positive effects on cognitive outcomes for children of poorly educated single mothers. Finally, the authors also provide evidence of a strong link between children's test scores at ages 4, 5, and 6 and their completed education.

Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Child Care Choices and Children's Cognitive Achievement: The Case of Single Mothers." Working Paper Series WP-06-09, Institute for Policy Research, Northwestern University, May 26, 2006.
2. Bernal, Raquel
Keane, Michael P.
Child Care Choices and Children's Cognitive Achievement: The Case of Single Mothers
Working Paper, Universidad de los Andes, February 2009
Cohort(s): Children of the NLSY79, NLSY79
Publisher: Universidad de los Andes
Keyword(s): Aid for Families with Dependent Children (AFDC); Child Care; Child Support; Children, Academic Development; Maternal Employment; Peabody Individual Achievement Test (PIAT- Math); Peabody Picture Vocabulary Test (PPVT); Temporary Assistance for Needy Families (TANF)

Permission to reprint the abstract has not been received from the publisher.

Also presented in Canberra, Australia, The Economics of Child Care Conference, April 2009.

We evaluate the effect of childcare vs. maternal time inputs on child cognitive development using the single mothers from the National Longitudinal Survey of Youth (NLSY79). To deal with non-random selection of children into childcare, we exploit the (plausibly) exogenous variation in welfare policy rules facing single mothers. In particular, the 1996 Welfare Reform, and earlier State level policy changes, generated substantial increases in their work/childcare use. Thus, we construct a comprehensive set of welfare policy variables, and use them (along with local demand conditions) as instruments to estimate child cognitive ability production functions. Because welfare rules are complex, we need many variables to characterize them. Thus, we face a "many instrument problem" (i.e., 2SLS severely biased toward OLS). We deal with this problem both by using LIML, and by using factor analysis to condense the instrument set. Results from the two approaches are very similar, and quite different from OLS. Using LIML along with factor analysis of the instruments leads to an efficiency gain (i.e., smaller standard errors) relative to using LIML alone. In our baseline specification, we estimate that a year of childcare reduces child test scores by 2.1% (.114 standard deviations). This estimate is quite robust across a wide range of specifications and instrument sets. But we find important interactions with type of care, maternal education and child gender. Indeed, only informal care leads to significant reductions in cognitive outcomes. Formal center-based care does not have any adverse effect. In addition, the value of the maternal time input is greater for more educated mothers, and girls are more adversely affect by childcare than boys. We do not find differential effects by child age or race/ethnicity.

Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Child Care Choices and Children's Cognitive Achievement: The Case of Single Mothers." Working Paper, Universidad de los Andes, February 2009.
3. Bernal, Raquel
Keane, Michael P.
Child Care Choices and Children’s Cognitive Achievement: The Case of Single Mothers
Journal of Labor Economics 29,3 (July 2011): 459-512.
Also: http://www.jstor.org/stable/10.1086/659343
Cohort(s): Children of the NLSY79, NLSY79
Publisher: University of Chicago Press
Keyword(s): Academic Development; Aid for Families with Dependent Children (AFDC); Armed Forces Qualifications Test (AFQT); Child Care; Child Care Arrangements; Child Support; Maternal Employment; Modeling, Instrumental Variables; Parental Investments; Parents, Single; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Peabody Picture Vocabulary Test (PPVT); Temporary Assistance for Needy Families (TANF); Welfare

We evaluate the effect of child care versus maternal time inputs on child cognitive development using single mothers from the NLSY79. To deal with nonrandom selection of children into child care, we exploit the exogenous variation in welfare policy rules facing single mothers. In particular, the 1996 welfare reform and earlier state-level policy changes generated substantial increases in their work/child care use. We construct a comprehensive set of welfare policy variables and use them as instruments to estimate child cognitive ability production functions. In our baseline specification, we estimate that a year of child care reduces child test scores by 2.1%.
Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Child Care Choices and Children’s Cognitive Achievement: The Case of Single Mothers." Journal of Labor Economics 29,3 (July 2011): 459-512.
4. Bernal, Raquel
Keane, Michael P.
Maternal Time, Child Care and Child Cognitive Development: The Case of Single Mothers
Presented: London, England, Econometric Society World Congress, 19-24 August, 2005, University College London.
Also: http://eswc2005.econ.ucl.ac.uk/papers/ESWC/2005/1405/Bernal_Keane_Maternal%20Time_01_2005.pdf
Cohort(s): Children of the NLSY79, NLSY79
Publisher: Econometric Society
Keyword(s): Child Care; Child Support; Children, Academic Development; Maternal Employment; Peabody Individual Achievement Test (PIAT- Math); Peabody Picture Vocabulary Test (PPVT)

Permission to reprint the abstract has not been received from the publisher.

This paper evaluates the effects of maternal time inputs and alternative providers' time inputs on children's cognitive development using the sample of single mothers in the National Longitudinal Survey of Youth (NLSY). In order to deal with the selection problem that arises when trying to assess the impact of mothers' employment and child care choices on children's development, we take advantage of the exogenous variation in employment and child care choices generated by the differences in welfare regulations across states and over time introduced by the Welfare Reform (1996) and prior to that by Section 1115 Welfare Waivers. In particular, we construct a comprehensive set of welfare policy variables at the individual and State level and use them as instrumental variables in order to identify the effects of maternal employment, child care and labor income on children's cognitive development. The results indicate that the effect of maternal employment on children's achievement is positive but insignificant. The effect of child care use is negative, significant and rather sizeable. In particular, one additional quarter of child use is associated with a reduction of 0.50% in test scores. In addition, the effect of income is significant and positive and in most cases large enough to offset the negative effect of child care. Finally, the negative effect of child care seems to be related to a significant negative effect of child care used after the first year after childbirth and mostly from the use of informal child care.
Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Maternal Time, Child Care and Child Cognitive Development: The Case of Single Mothers." Presented: London, England, Econometric Society World Congress, 19-24 August, 2005, University College London.
5. Bernal, Raquel
Keane, Michael P.
Quasi-Structural Estimation of a Model of Child Care Choices
Presented: Chicago, IL, American Economic Association Annual Meetings, January 2007.
Also: http://www.aeaweb.org/annual_mtg_papers/2007/0107_1300_0504.pdf
Cohort(s): Children of the NLSY79, NLSY79
Publisher: American Economic Association
Keyword(s): Armed Forces Qualifications Test (AFQT); Child Care; Children, Academic Development; Maternal Employment; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Peabody Picture Vocabulary Test (PPVT)

Permission to reprint the abstract has not been received from the publisher.

This paper evaluates the effects of maternal vs. alternative care providers' time inputs on children's cognitive development using the sample of single mothers in the National Longitudinal Survey of Youth. To deal with the selection problem created by unobserved heterogeneity of mothers and children, we develop a model of mother's employment and child-care decisions. Guided by this model, we obtain approximate decisions rules for employment and child care use, and estimate these jointly with the child's cognitive ability production function – an approach we refer to as "quasi-structural." This joint estimation implements a selection correction. To help identify our selection model, we take advantage of the substantial and plausibly exogenous variation in employment and child-care choices of single mothers generated by the variation in welfare rules across states and over time – especially, the large changes created by the 1996 welfare reform legislation and earlier State waivers. Welfare rules provide natural exclusion restrictions, as it is plausible they enter decision rules for employment and day care use, while not entering the child cognitive ability production function directly. Our results imply that if a mother works full-time, while placing a child in day care, for one full year, it reduces the child's cognitive ability test score by roughly 2.7% on average, which is 0.14 standard deviations of the score distribution. However, we find evidence of substantial observed and unobserved heterogeneity in the day care effect. Negative effects of day care on test scores are larger for better-educated mothers and for children with larger skill endowments.
Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Quasi-Structural Estimation of a Model of Child Care Choices." Presented: Chicago, IL, American Economic Association Annual Meetings, January 2007.
6. Bernal, Raquel
Keane, Michael P.
Quasi-structural Estimation of a Model of Childcare Choices and Child Cognitive Ability Production
Journal of Econometrics 156,1 (May 2010): 164-189.
Also: http://www.sciencedirect.com/science/article/pii/S0304407609002140
Cohort(s): Children of the NLSY79, NLSY79
Publisher: Elsevier
Keyword(s): Aid for Families with Dependent Children (AFDC); Armed Forces Qualifications Test (AFQT); Child Care; Children, Academic Development; Maternal Employment; Peabody Individual Achievement Test (PIAT- Math); Peabody Individual Achievement Test (PIAT- Reading); Peabody Picture Vocabulary Test (PPVT); State Welfare; State-Level Data/Policy; Temporary Assistance for Needy Families (TANF); Welfare

This article evaluates the effects of maternal vs. alternative care providers' time inputs on children's cognitive development using the sample of single mothers in the National Longitudinal Survey of Youth. To deal with the selection problem created by unobserved heterogeneity of mothers and children, we develop a model of mother's employment and childcare decisions. We then obtain approximate decision rules for employment and childcare use, and estimate these jointly with the child's cognitive ability production function. To help identify our selection model, we take advantage of the plausibly exogenous variation in employment and childcare choices of single mothers generated by the variation in welfare rules across states and over time created by the 1996 welfare reform legislation and earlier State waivers.
Bibliography Citation
Bernal, Raquel and Michael P. Keane. "Quasi-structural Estimation of a Model of Childcare Choices and Child Cognitive Ability Production." Journal of Econometrics 156,1 (May 2010): 164-189.
7. Gritz, R. Mark
Durante, Richard
Keane, Michael P.
Lessler, Judith
An Examination of School-to-Work Transitions in the NLSY
Technical Proposal, Battelle Memorial Institute, August 13, 1994
Cohort(s): NLSY79
Publisher: Battelle Human Affairs Research Center
Keyword(s): Childbearing, Adolescent; High School Completion/Graduates; High School Dropouts; Labor Force Participation; School Completion; Schooling, Post-secondary; Training; Transition, School to Work; Welfare; Work Experience

This proposed research program will conduct a comprehensive examination of school-to-work transitions in the National Longitudinal Survey of Youth Cohort. The results from the five research projects included in the program will enhance the ability of BLS to continue disseminating vital information to policy makers, educating the public so that labor force participants can make more informed choices, and improving NLS survey procedures. The design of the program captures several key elements influencing youths' progression through school to employment. In the first stage, young men and women must successfully negotiate their way to graduation from high school. The second stage encountered in the school-to-work path involves the advancement into postsecondary education. The third project will focus on the interactions of training programs, two- and four-year colleges, and work experience and their impacts on wages and employment. The fourth project will address a closely related issue: the importance of borrowing constraints for youths' decisions to continue in school, and it analyzes how various government policies might induce greater participation in schooling. The final project will assess the reliability and quality of the NLSY survey that provides the data that are essential to improve understanding of the school-to-work transition process.
Bibliography Citation
Gritz, R. Mark, Richard Durante, Michael P. Keane and Judith Lessler. "An Examination of School-to-Work Transitions in the NLSY." Technical Proposal, Battelle Memorial Institute, August 13, 1994.
8. Imai, Susumu
Keane, Michael P.
Intertemporal Labor Supply and Human Capital Accumulation
International Economic Review 45,2 (May 2004): 601–641.
Also: http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2354.2004.00138.x/abstract
Cohort(s): NLSY79
Publisher: Blackwell Publishing, Inc. => Wiley Online
Keyword(s): Human Capital; Labor Supply; Savings; Wages

We solve and estimate a dynamic model that allows agents to optimally choose their labor hours and consumption and that allows for both human capital accumulation and savings. Estimation results and simulation exercises indicate that the intertemporal elasticity of substitution is much higher than the conventional estimates and the downward bias comes from the omission of the human capital accumulation effect. The human capital accumulation effect renders the life-cycle path of the shadow wage relatively flat, even though wages increase with age. Hence, a rather flat life-cycle labor supply path can be reconciled with a high intertemporal elasticity of substitution.
Bibliography Citation
Imai, Susumu and Michael P. Keane. "Intertemporal Labor Supply and Human Capital Accumulation." International Economic Review 45,2 (May 2004): 601–641. A.
9. Keane, Michael P.
Four Essays in Empirical Macro and Labor Economics
Ph.D. Dissertation, Brown University, 1990
Cohort(s): Young Men
Publisher: UMI - University Microfilms, Bell and Howell Information and Learning
Keyword(s): Business Cycles; Industrial Sector; Inflation; Modeling, Fixed Effects; Wages

This thesis is composed of four essays examining the effects of real and nominal shocks on the economy, in particular the oil price shocks of the 1970s. Microdata from the NLS Young Men were used to analyze the impact of these shocks and of the business cycle on real offer wages, sectoral location probabilities, employment probabilities, and the interindustry wage differentials. The first essay develops a practical extension of McFadden's Method of Simulated Moments estimator to the panel data case and to selectivity models. A selectivity model is estimated to determine the true effect of the business cycle on real offer wages. After correcting for selection bias and a complex pattern of serial correlation, real wages are found to be weakly procyclical. The second essay uncovers substantial effects of real oil price shocks on aggregate and sectoral real offer wages. The results are inconsistent with the predictions of equilibrium sectoral models, because the price shocks reduced respondents' location probability in sectors where relative wages increased. Nominal contract based theories of unemployment predicting inflation surprises should be negatively correlated with real offer wages. The third essay finds a positive correlation which is robust to controls for real shocks. Analysis shows substantial bias stemming from the shock's effect on labor force composition; low-wage workers tend to become employed following positive inflation shocks, masking the positive correlation between real offer wages and inflation. Using a fixed effects estimator on a long panel, the final essay obtains more efficient estimates of interindustry wage differentials than those contained in the existing literature. Individual fixed effects account for eighty-four percent of the variance of log wages across industries. Since unobserved job characteristics may account for the remaining sixteen percent, these results are consistent with competitive theories of w age determination. The interindustry wage structure is found to be highly responsive to real shocks, suggesting that relative wage movements may be important for our understanding of business cycle phenomena. [UMI ADG91-01788]
Bibliography Citation
Keane, Michael P. Four Essays in Empirical Macro and Labor Economics. Ph.D. Dissertation, Brown University, 1990.
10. Keane, Michael P.
Individual Heterogeneity and Interindustry Wage Differentials
Journal of Human Resources 28,1 (Winter 1993): 134-161.
Also: http://www.jstor.org/stable/146091
Cohort(s): Young Men
Publisher: University of Wisconsin Press
Keyword(s): Heterogeneity; Modeling, Fixed Effects; Wage Differentials; Wage Theory

Estimates of interindustry wage differentials are obtained using a fixed-effects estimator on a long panel, the National Longitudinal Survey of Young Men (NLS). After controlling for observable worker characteristics, 84 percent of the residual variance of log wages across industries is explained by individual fixed effects. Only 16 percent of the residual variance is "explained" by industry dummies. Since no controls for specific job characteristics are used, job characteristics that vary across industries could potentially explain this rather small residual across-industry log wage variance that is not attributable to individual effects. Clearly, then, these data do not force us to resort to noncompetitive explanations of interindustry wage differentials, such as efficiency wage theory. Furthermore, efficiency wage theories predict that wages in efficiency wage paying (or primary) industries should be relatively rigid. Therefore, industry wage differentials should widen in recessions. However, no such tendency is found in the data. (ABI/Inform)
Bibliography Citation
Keane, Michael P. "Individual Heterogeneity and Interindustry Wage Differentials." Journal of Human Resources 28,1 (Winter 1993): 134-161.
11. Keane, Michael P.
Nominal-Contracting Theories of Unemployment: Evidence from Panel Data
American Economic Review 83,4 (September 1993): 932-952.
Also: http://www.jstor.org/stable/2117586
Cohort(s): Young Men
Publisher: American Economic Association
Keyword(s): Inflation; Unemployment Compensation; Wage Dynamics

Permission to reprint the abstract has not been received from the publisher.

Data from the National Longitudinal Survey of Young Men are used to study how nominal shocks affect real wages in the economy and in specific sectors. Nominal-contracting theories of unemployment hold that real wages and nominal shocks have a negative correlation. The research does not support these theories. The study shows that real wages have no correlation with either money-growth shocks or inflation and suggests that real shocks could lead to fluctuations in real wages.
Bibliography Citation
Keane, Michael P. "Nominal-Contracting Theories of Unemployment: Evidence from Panel Data." American Economic Review 83,4 (September 1993): 932-952.
12. Keane, Michael P.
Moffitt, Robert A.
Runkle, David
Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data
Journal of Political Economy 96,6 (December 1988): 1232-1266.
Also: http://www.jstor.org/stable/1831950
Cohort(s): Young Men
Publisher: University of Chicago Press
Keyword(s): Employment, In-School; Heterogeneity; Selectivity Bias/Selection Bias; Wages

One of the oldest questions in macroeconomics concerns the correlation between the business cycle and the real wage. The authors provide new evidence on this question by examining the possible bias that arises when: (1) workers have unobserved characteristics that affect their wages; and (2) those workers who move in and out of the workforce over the cycle have systematically different unobserved characteristics than those who stay in. The authors also distinguish between the bias that arises from those unobserved characteristics that are permanent components of wages and those which are transitory. Micro panel data from the Young Men cohort and maximum likelihood selectivity bias techniques were utilized to estimate both the extent of this selectivity-cum- aggregation bias and the true effect of the cycle on real wages. It was found that selectivity bias is present-- workers are more likely to lose employment during a recession if they have high wages, especially if they have a high transitory wage component. The primary source of this selectivity bias is a rigid-wage manufacturing sector in which those with both high permanent and transitory wages are more likely to be laid off. Overall, the effect of selectivity is to bias OLS estimates based only on workers in a procyclical direction. The results show that the true effect of the cycle on wages is still procyclical, but much smaller in magnitude than previous estimates using micro data have suggested.
Bibliography Citation
Keane, Michael P., Robert A. Moffitt and David Runkle. "Real Wages over the Business Cycle: Estimating the Impact of Heterogeneity with Micro Data." Journal of Political Economy 96,6 (December 1988): 1232-1266.
13. Keane, Michael P.
Prasad, Eswar S.
Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis
Review of Economics and Statistics 78,3 (August 1996): 389-400.
Also: http://www.jstor.org/view/00346535/di975990/97p0185b/0
Cohort(s): Young Men
Publisher: MIT Press
Keyword(s): Employment; Heterogeneity; Skilled Workers; Wage Differentials; Wage Effects; Wages, Adult

In this paper, we use micro panel data to examine the effects of oil price changes on employment and real wages, at the aggregate and industry levels. We also measure differences in the employment and wage responses for workers differentiated on the basis of skill level. We find that oil price increases result in a substantial decline in real wages for all workers, but raise the relative wage of skilled workers. The use of panel data econometric techniques to control for unobserved heterogeneity is essential to uncover this result, which is completely hidden in OLS estimates. While the short-run effect of an oil price increase on aggregate employment is negative, the long-run effect is in fact positive. We find that changes in oil prices induce changes in employment shares and relative wages across industries. However, we find little evidence that oil price changes cause labor to consistently flow into those sectors with relative wage increases. Copyright 1996 by MIT Press.
Bibliography Citation
Keane, Michael P. and Eswar S. Prasad. "Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis." Review of Economics and Statistics 78,3 (August 1996): 389-400.
14. Keane, Michael P.
Wolpin, Kenneth I.
Eliminating Race Differences in School Attainment and Labor Market Success
Journal of Labor Economics 18,4 (October 2000): 614-652.
Also: http://www.jstor.org/stable/10.1086/209971
Cohort(s): NLSY79
Publisher: University of Chicago Press
Keyword(s): Earnings; Education; Educational Attainment; Labor Market Outcomes; Life Cycle Research; Occupational Choice; Racial Differences

In this article, we provide quantitative evidence on the effects of monetary incentive schemes designed to reduce racial differences in school attainment and earnings. Our analysis is based on the structural estimation of a dynamic model of schooling, work, and occupational choice decisions over the life cycle. We consider two recent proposals that, although not specifically targeted to blacks, can be expected to have differential racial impacts. One proposal, suggested by Robert Reich, provides a high school graduation bonus to youths from lower-income families. The other, suggested by Edmund Phelps, provides wage subsidies to low-wage workers.
Bibliography Citation
Keane, Michael P. and Kenneth I. Wolpin. "Eliminating Race Differences in School Attainment and Labor Market Success." Journal of Labor Economics 18,4 (October 2000): 614-652.
15. Keane, Michael P.
Wolpin, Kenneth I.
Estimating Welfare Effects Consistent with Forward-Looking Behavior: Part II: Empirical Results
Journal of Human Resources 37,3 (Summer 2002): 600-622.
Also: http://www.jstor.org/stable/3069683
Cohort(s): NLSY79
Publisher: University of Wisconsin Press
Keyword(s): Behavior; Benefits; Fertility; Labor Force Participation; Marriage; Schooling; Welfare

In this paper, we provide estimates of welfare benefit effects on a set of behaviors that includes welfare participation, fertility, marriage, work and schooling using approximations to the decision rules that would be derived from an explicit dynamic optimization problem. We use the stylized model and associated simulations from Part I as a guide in specifying the approximate decision rules that we estimate here. The estimates are based on data from the 1979 youth cohort of the National Longitudinal Surveys of Labor Market Experience (NLSY79).
Bibliography Citation
Keane, Michael P. and Kenneth I. Wolpin. "Estimating Welfare Effects Consistent with Forward-Looking Behavior: Part II: Empirical Results." Journal of Human Resources 37,3 (Summer 2002): 600-622.
16. Keane, Michael P.
Wolpin, Kenneth I.
Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior
PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, 2006.
Also: http://www.econ.upenn.edu/Centers/pier/Archive/06-006.pdf
Cohort(s): NLSY79
Publisher: Penn Institute for Economic Research (PIER)
Keyword(s): Behavior; Heterogeneity; Modeling; Welfare; Women

Permission to reprint the abstract has not been received from the publisher.

Opportunities for external validation of behavioral models in the social sciences that are based on randomized social experiments or on large regime shifts, that can be treated as experiments for the purpose of model validation, are extremely rare. In this paper, we consider an alternative approach, namely mimicking the essential element of regime change by non-randomly holding out from estimation a portion of the sample that faces a significantly different policy regime. The non-random holdout sample is used for model validation/selection. We illustrate the non-random holdout sample approach to model validation in the context of a model of welfare program participation. The policy heterogeneity that we exploit to generate a non-random holdout sample takes advantage of the wide variation across states that has existed in welfare policy.

We implement the model using 15 years of information from the 1979 youth cohort of the National Longitudinal Surveys of Labor Market Experience (NLSY79), supplemented with state level welfare benefit rules that we have collected for each state over a 23 year period prior to the new welfare reform. Benefit levels changed considerably over the decision-making period of the women in the NLSY79 sample.

Bibliography Citation
Keane, Michael P. and Kenneth I. Wolpin. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior." PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, 2006.
17. Keane, Michael P.
Wolpin, Kenneth I.
Exploring the Usefulness of a Nonrandom Holdout Sample for Model Validation: Welfare Effects On Female Behavior
International Economic Review 48,4 (November 2007): 1351-1378.
Also: http://onlinelibrary.wiley.com/doi/10.1111/j.1468-2354.2007.00465.x/abstract
Cohort(s): NLSY79
Publisher: U.S. International Trade Commission
Keyword(s): Behavior; Welfare; Women

A particularly challenging use of decision-theoretic models in economics is to forecast the impact of large changes in the environment. The problem we explore in this article is how to gain confidence in a model's ability to predict the impact of such large changes. We show that an approach to validation and model selection that includes the choice of a "on random holdout sample," a sample that differs significantly from the estimation sample along the policy dimension that the model is meant to forecast, can be fruitful.
Bibliography Citation
Keane, Michael P. and Kenneth I. Wolpin. "Exploring the Usefulness of a Nonrandom Holdout Sample for Model Validation: Welfare Effects On Female Behavior." International Economic Review 48,4 (November 2007): 1351-1378.
18. Keane, Michael P.
Wolpin, Kenneth I.
The Career Decisions of Young Men
Journal of Political Economy 105,3 (June 1997): 473-522.
Also: http://www.jstor.org/stable/10.1086/262080
Cohort(s): NLSY79
Publisher: University of Chicago Press
Keyword(s): Absenteeism; Human Capital; Part-Time Work; Training, Occupational; Training, On-the-Job; Wage Differentials; Wage Levels

This paper provides structural estimates of a dynamic mode of schooling, work, and occupational choice decisions based on 11 years of observations on a sample of young men from the 1979 youth cohort of the National Longitudinal Surveys of Labor Market Experience (NLSY). The structural estimation framework that we adopt fully imposes the restrictions of the theory and permits an investigation of whether such a theoretically restricted model can succeed in quantitatively fitting the observed data patterns. We find that a suitably extended human capital investment model can in fact do an excellent job of fitting observed data on school attendance work, occupational choices, and wages in the NLSY data on young men and also produces reasonable forecasts of future work decisions and wage patterns. Copyright 1997 by The University of Chicago All rights reserved.
Bibliography Citation
Keane, Michael P. and Kenneth I. Wolpin. "The Career Decisions of Young Men." Journal of Political Economy 105,3 (June 1997): 473-522.