Treatment Evaluation with Selective Participation and Ineligibles

Matching methods for treatment evaluation based on a conditional independence assumption do 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 special 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 towards making subsidized work detrimental in moving individuals into employment.

Figure: Hazard rates into YP by duration of enemployment spell and age at registration with employment office