Article
Stochastic dominance and demographic policy evaluation: a critique
Economics Working Papers (2002–2016)
Document Type
Working Paper
Publication Date
4-14-2013
Working Paper Number
WP #13009, April 2013
Abstract
Stochastic dominance (SD) is commonly used to rank income distribution 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.
Disciplines
File Format
application/pdf
Length
41 pages
Citation Information
Juan Carlos Cordoba and Xiying Liu. "Stochastic dominance and demographic policy evaluation: a critique" (2013) Available at: http://works.bepress.com/juancarlos-cordoba/5/