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Article
Stochastic dominance and demographic policy evaluation: a critique
Journal of Demographic Economics
  • Juan Carlos Cordoba, Iowa State University
  • Xiying Liu, Wuhan University
Document Type
Article
Publication Version
Submitted Manuscript
Publication Date
1-1-2016
DOI
10.1017/dem.2016.1
Abstract

Stochastic dominance (SD) is commonly used to rank income distributions and assess social policies. The literature argues that SD is a robust criterion for policy evaluation because it requires minimal knowledge of the social welfare function. We argue that, on the contrary, SD is not a robust criterion. We do this by carefully introducing microfoundations into a model by Chu and Koo (1990) who use SD to provide support to family-planning programs aiming at reducing the fertility of the poor. We show that fertility restrictions are generally detrimental for both individual and social welfare in spite of the fact that SD holds. Our findings are an application of the Lucas’ Critique.

Citation Information
Juan Carlos Cordoba and Xiying Liu. "Stochastic dominance and demographic policy evaluation: a critique" Journal of Demographic Economics Vol. 82 Iss. 1 (2016) p. 111 - 138
Available at: http://works.bepress.com/juancarlos-cordoba/15/