Tuesday, 4 March 2014

The bitter taste of a better life

A few weeks ago we argued that randomised control trials (RCTs) in economic research were finally coming of age. A new paper has an ambitious objective: using an RCT to evaluate whether government intervention can improve people’s lives. The results are rather alarming.

The authors focus on an experiment run by the British government in the early 2000s: an RCT that offered incentives to disadvantaged people to stay in work. A group of 3,500 single mothers, who were either out of work or working part-time, were split into two groups. The control group was given nothing; the treatment group was given coaching and financial incentives to work. Individuals working more than 30 hours per week, for example, could receive a tax-free payment of £400 ($666). All forms of treatment lasted, at best, just under 3 years.

Five years after the experiment started, the authors checked up on their subjects. The treatment group reported significantly lower levels of well-being, even though those individuals ended up with higher earnings than the control group. The treatment group were less happy with their lives and worried more about budgeting and...Continue reading

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