Comparing Quasi-Experimental Designs and Structural Models for Policy Evaluation

Lone mothers are overrepresented among poor people in many European
countries, with worrying consequences for themselves and their children.
Also in Norway, which is known as a country of economic and welfare success,
lone mothers are at least three times more likely to be poor than married
mothers with children. In 1998, a welfare reform increased the amount of
benefits and introduced working requirements. Using a quasi-experimental
evaluation approach, Mogstad and Pronzato (2008) find a positive effect of
the reform on lone mothers’ labour supply but a weak reduction of their
poverty. In this paper, I estimate a static structural model of labour
supply and take-up decisions, which may be used as an alternative method of
policy evaluation and I compare the results using the two different
approaches. Despite the differences in the assumptions I make for the two
models, results are fairly comparable. Moreover, estimates from the
structural model allows us to derive the policy parameters which would
minimize poverty among lone mothers