Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate Progresa”, IFS Working Papers EWP05/01

In this paper we evaluate the effect of a large welfare program in rural Mexico. For such a purpose we use an evaluation sample that includes a number of villages where the program was not implemented for evaluation purposes. We estimate a structural model of education choices and argue that without such a framework it is impossible to evaluate the effect of the program and, especially, possible changes to its structure. We also argue that the randomized component of the data allows us to identify a more flexible model that is better suited to evaluate the program. We find that the program has a positive effect on the enrollment of children, especially after primary school. We also find that an approximately revenue neutral change in the program that would increase the grant for secondary school children while eliminating for the primary school children would have a substantially larger effect on enrollment of the latter, while having minor effects on the former. ∗This paper has benefitted from valuable comments from Gary Becker, Esther Duflo, Jim Heckman, Hide Ichimura, Paul Schultz, Miguel Székely, Petra Todd and many seminar audiences. Responsibility for any errors is ours. †UCL, IFS and NBER