This paper evaluates a micro-simulation technique by comparing the simulated outcome of a program with its actual effect. The ex ante evaluation is carried out for a conditional cash transfer program, where poor households were given money if the children attended school. A model of occupational choice is used to simulate the expected impact of the program. The author selects the PROGRESA program, a well-known initiative in rural Mexico which has been in place since 1997 and whose objectives include the increase of secondary school enrollment ratios and the improvement of health services provision through conditional cash transfers to eligible Mexican families. The data is taken from surveys conducted between November 1997 and November 1999.
The document is structured as follows. After the introduction, the second section discusses the model selection and how the model can be used for ex ante simulations. Section three presents the results for the simulation exercise. In Section four results from a conventional ex post evaluation are presented and related to similar findings in the literature, while in the fifth section ex ante and ex post results are compared and some lessons from the simulation exercise are drawn. The seventh section concludes.
The author concludes that the micro-simulation correctly predicts that school enrollment ratios among the target population will increase as a result of a cash payment for school attendance. Therefore, this model is a useful tool to assess the effects on poverty of such relief schemes. However, the author suggests that his model might not perform well if the population is unequally distributed over three possible categories of occupational choice: those who only attend school, those who only work, and those who do both. A possible solution would be the use of a micro-simulation method for a dichotomous framework, even if some features of the original estimates get lost in this process.