Education Choices in Mexico: Using a Structural Model and a Randomized Experiment to Evaluate Progresa

This discussion paper was presented in the seminar "First Meeting of the Social Policy Monitoring Network: Conditional Cash-Transfer Programs". In this paper the authors use an economic model to analyze data from a major randomized social experiment, namely PROGRESA in Mexico, and to evaluate its impact on school participation. They show the usefulness of using experimental data to estimate a structural economic model as well as the importance of a structural model in interpreting experimental results. The availability of the experiment also allows them to estimate the program's general equilibrium effects, which they then incorporate into out simulations. Their main findings are : (i) the program's grant has a much stronger impact on school enrollment than an equivalent reduction in child wages; (ii) the program has a positive effect on the enrollment of children, especially after primary school; this result is well replicated by the parsimonious structural model; (iii) there are sizeable effects of the program on child wages, which, however, reduce the effectiveness of the program only marginally; (iv) a 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.