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Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedHandbook on impact EvaluationHandbook on impact EvaluationQuantitative Methods and PracticesShahidur R. KhandkerGayatri B. KoolwalHussain A. Samad 2010 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington DC 20433 Telephone: 202-473-1000 Internet: : rights reserved1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The fi ndings, interpretations, and conclusions expressed in this volume do not necessarily refl ect the views of the Executive Directors of The World Bank or the governments they World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such and PermissionsThe material in this publication is copyrighted.

Handbook on Impact Evaluation: Quantitative Methods and Practices makes a valu- able contribution in this area by providing, for policy and research audiences, a com-

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1 Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedHandbook on impact EvaluationHandbook on impact EvaluationQuantitative Methods and PracticesShahidur R. KhandkerGayatri B. KoolwalHussain A. Samad 2010 The International Bank for Reconstruction and Development / The World Bank1818 H Street NWWashington DC 20433 Telephone: 202-473-1000 Internet: : rights reserved1 2 3 4 13 12 11 10 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The fi ndings, interpretations, and conclusions expressed in this volume do not necessarily refl ect the views of the Executive Directors of The World Bank or the governments they World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such and PermissionsThe material in this publication is copyrighted.

2 Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: other queries on rights and licenses, including subsidiary rights, should be addressed to the Offi ce of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: 978-0-8213-8028-4eISBN: 978-0-8213-8029-1 DOI: of Congress Cataloging-in-Publication DataKhandker, Shahidur R. Handbook on impact evaluation : quantitative methods and practices / Shahidur R.

3 Khandker, Gayatri B. Koolwal, Hussain A. Samad. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8028-4 ISBN 978-0-8213-8029-1 (electronic) 1. Economic development projects evaluation . 2. Economic assistance evaluation . I. Koolwal, Gayatri B. II. Samad, Hussain A., 1963- III. Title. 2009 dc22 2009020886 Cover design by Patricia ..xiiiPreface ..xvAbout the Authors .. xviiAbbreviations .. xixPart 1 Methods and Practices .. 11. References ..62. Basic Issues of evaluation ..7 Summary ..7 Learning Objectives ..7 Introduction: Monitoring versus evaluation ..8 Monitoring ..8 Setting Up Indicators within an M&E Framework ..9 Operational evaluation ..16 Quantitative versus Qualitative impact Assessments.

4 18 Quantitative impact Assessment: Ex Post versus Ex Ante impact Evaluations .. 20 The Problem of the Counterfactual ..22 Basic Theory of impact evaluation : The Problem of Selection Bias ..25 Different evaluation Approaches to Ex Post impact evaluation ..27 Overview: Designing and Implementing impact Evaluations ..28 Questions ..29 References ..303. Randomization ..33 Summary ..33 Learning Objectives ..33viContents Setting the Counterfactual ..34 Statistical Design of Randomization ..34 Calculating Treatment Effects ..35 Randomization in evaluation Design: Different Methods of Randomization ..38 Concerns with Randomization ..38 Randomized impact evaluation in Practice ..39 Diffi culties with Randomization ..47 Questions ..49 Notes ..51 References ..514. Propensity Score Matching.

5 53 Summary ..53 Learning Objectives ..53 PSM and Its Practical Uses ..54 What Does PSM Do? ..54 PSM Method in Theory ..55 Application of the PSM Method ..58 Critiquing the PSM Method ..63 PSM and Regression-Based Methods ..64 Questions ..66 Notes ..67 References ..685. Double Summary ..71 Learning Objectives ..71 Addressing Selection Bias from a Different Perspective: Using Differences as Counterfactual ..71 DD Method: Theory and Application ..72 Advantages and Disadvantages of Using DD ..76 Alternative DD Models ..78 Questions ..82 Notes ..84 References ..84viiContents6. Instrumental Variable Estimation ..87 Summary ..87 Learning Objectives ..87 Introduction ..87 Two-Stage Least Squares Approach to IVs.

6 89 Concerns with IVs ..91 Sources of IVs ..95 Questions ..99 Notes ..100 References ..1007. Regression Discontinuity and Pipeline Methods ..103 Summary ..103 Learning Objectives ..103 Introduction ..104 Regression Discontinuity in Theory ..104 Advantages and Disadvantages of the RD Approach ..108 Pipeline Comparisons ..110 Questions ..111 References ..1128. Measuring Distributional Program Effects ..115 Summary ..115 Learning Objectives ..115 The Need to Examine Distributional Impacts of Programs ..115 Examining Heterogeneous Program Impacts: Linear Regression Framework ..116 Quantile Regression Approaches ..118 Discussion: Data Collection Issues ..124 Notes ..125 References.

7 1259. Using Economic Models to Evaluate Policies ..127 Summary ..127 Learning Objectives ..127 Introduction ..127viiiContents Structural versus Reduced-Form Approaches ..128 Modeling the Effects of Policies ..130 Assessing the Effects of Policies in a Macroeconomic Framework ..131 Modeling Household Behavior in the Case of a Single Treatment: Case Studies on School Subsidy Programs ..133 Conclusions ..135 Note ..136 References ..13710. Conclusions ..139 Part 2 Stata Exercises .. 14311. Introduction to Stata ..145 Data Sets Used for Stata Exercises ..145 Beginning Exercise: Introduction to Stata ..146 Working with Data Files: Looking at the Content ..151 Changing Data Sets ..158 Combining Data Sets ..162 Working with .log and .do Files ..16412. Randomized impact evaluation ..171 Impacts of Program Placement in Villages.

8 171 Impacts of Program Participation ..173 Capturing Both Program Placement and Participation ..175 Impacts of Program Participation in Program Villages ..176 Measuring Spillover Effects of Microcredit Program Placement ..177 Further Exercises ..178 Notes ..17913. Propensity Score Matching Technique ..181 Propensity Score Equation: Satisfying the Balancing Property ..181 Average Treatment Effect Using Nearest-Neighbor Matching ..185 Average Treatment Effect Using Stratifi cation Matching ..186 Average Treatment Effect Using Radius Matching ..186 Average Treatment Effect Using Kernel Matching ..187 Checking Robustness of Average Treatment Effect ..187 Further Exercises ..188 Reference ..188ixContents14. Double-Difference Method ..189 Simplest Implementation: Simple Comparison Using ttest ..189 Regression Implementation.

9 190 Checking Robustness of DD with Fixed-Effects Regression ..192 Applying the DD Method in Cross-Sectional Data ..193 Taking into Account Initial Conditions ..196 The DD Method Combined with Propensity Score Matching ..198 Notes ..201 Reference ..20115. Instrumental Variable Method ..203 IV Implementation Using the ivreg Command ..203 Testing for Endogeneity: OLS versus IV ..205 IV Method for Binary Treatment: treatreg Command ..206 IV with Fixed Effects: Cross-Sectional Estimates ..207 IV with Fixed Effects: Panel Estimates ..208 Note ..20916. Regression Discontinuity Design ..211 impact Estimation Using RD ..211 Implementation of Sharp Discontinuity ..212 Implementation of Fuzzy Discontinuity ..214 Exercise ..216 Answers to Chapter Questions .. 217 Appendix: Programs and .do Files for Chapter 12 16 Exercises .. 219 Index .. Case Study: PROGRESA (Oportunidades) in Mexico.

10 Case Study: Assessing the Social impact of Rural Energy Services in Nepal .. Case Study: The Indonesian Kecamatan Development Project .. Case Study: Monitoring the Nutritional Objectives of the FONCODES Project in Peru .. Case Study: Mixed Methods in Quantitative and Qualitative Approaches .. Case Study: An Example of an Ex Ante evaluation .. Case Study: PROGRESA (Oportunidades) .. Case Study: Using Lotteries to Measure Intent-to-Treat impact .. Case Study: Instrumenting in the Case of Partial Compliance .. Case Study: Minimizing Statistical Bias Resulting from Selective Attrition .. Case Study: Selecting the Level of Randomization to Account for Spillovers .. Case Study: Measuring impact Heterogeneity from a Randomized Program .. Case Study: Effects of Conducting a Baseline .. Case Study: Persistence of Unobserved Heterogeneity in a Randomized Program.


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