The Importance of Noncognitive Skills: Lessons from the GED Testing Program by James J. Heckman and Yona Rubinstein. Published in volume 91, issue 2, pages 145-149 of American Economic Review, May 2001

This paper summarizes the contributions of microeconometrics to economic knowledge. Four main themes are developed. (1) Microeconometricians developed new tools to respond to econometric problems raised by the analysis of the new sources of micro data produced after the Second World War. (2) Microeconometrics improved on aggregate time-series methods by building models that linked economic models for individuals to data on individual behavior. (3) An important empirical regularity detected by the field is the diversity and heterogeneity of behavior. This heterogeneity has profound consequences for economic theory and for econometric practice. (4) Microeconometrics has contributed substantially to the scientific evaluation of public policy.

Accounting for individual-level heterogeneity in the response to treatment is a major development in the econometric literature on program evaluation. A substantial body of empirical evidence demonstrates that econometric models fit on individual-level data manifest heterogeneity in treatment effects that is present even after conditioning on observables. An important distinction is the one between evaluation models where participation in the program being evaluated is based, at least in part, on unobserved idiosyncratic responses to treatment and models where participation is not based on unobserved idiosyncratic responses. This is the distinction between selection on unobservables and selection on observables. The validity of entire classes of evaluation estimators hinges on whether or not they allow agents to act on unobserved idiosyncratic responses. In a wide variety of applications, the available evidence suggests that not only are ex post (postenrollment) responses heterogeneous, but that ex ante decisions to participate in programs are based, in part, on these heterogeneous responses (Heckman and Vytlacil, 2000b, 2001).

This paper estimates a dynamic model of schooling attainment to investigate the sources of racial and ethnic disparity in college attendance. Parental income in the child's adolescent years is a strong predictor of this disparity. This is widely interpreted to mean that credit constraints facing families during the college-going years are important. Using NLSY data, we find that it is the long-run factors associated with parental background and family environment, and not credit constraints facing prospective students in the college-going years, that account for most of the racial-ethnic college-going differential. Policies aimed at improving these long-term family and environmental factors are more likely to be successful in eliminating college attendance differentials than short-term tuition reduction and family income supplement policies aimed at families with college age children.