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Source: Penn Institute for Economic Research

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1.	Keane, Michael P. Wolpin, Kenneth I.
1.	Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, 2006. Also: http://www.econ.upenn.edu/Centers/pier/Archive/06-006.pdf Cohort(s): NLSY79 Publisher: Penn Institute for Economic Research (PIER) Keyword(s): Behavior; Heterogeneity; Modeling; Welfare; Women Permission to reprint the abstract has not been received from the publisher. Opportunities for external validation of behavioral models in the social sciences that are based on randomized social experiments or on large regime shifts, that can be treated as experiments for the purpose of model validation, are extremely rare. In this paper, we consider an alternative approach, namely mimicking the essential element of regime change by non-randomly holding out from estimation a portion of the sample that faces a significantly different policy regime. The non-random holdout sample is used for model validation/selection. We illustrate the non-random holdout sample approach to model validation in the context of a model of welfare program participation. The policy heterogeneity that we exploit to generate a non-random holdout sample takes advantage of the wide variation across states that has existed in welfare policy. We implement the model using 15 years of information from the 1979 youth cohort of the National Longitudinal Surveys of Labor Market Experience (NLSY79), supplemented with state level welfare benefit rules that we have collected for each state over a 23 year period prior to the new welfare reform. Benefit levels changed considerably over the decision-making period of the women in the NLSY79 sample.
	Bibliography Citation Keane, Michael P. and Kenneth I. Wolpin. "Exploring the Usefulness of a Non-Random Holdout Sample for Model Validation: Welfare Effects on Female Behavior." PIER Working Paper Archive 06-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, 2006.

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