E-mail address: r.blundell@ucl.ac.uk

University College London, Gower Street, London, WC1E 6BT U.K.

Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE U.K.

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E-mail address: monica_d@ifs.org.uk

Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE U.K.

CEF‐UP University of Porto, Rua Dr Roberto Frias, 4200‐464 Porto, Portugal

IZA

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E-mail address: c.meghir@yale.edu

Yale University, New Haven, CT, 06520 U.S.A.

Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE U.K.

IZA

NBER

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E-mail address: j.shaw@ifs.org.uk

Institute for Fiscal Studies, 7 Ridgmount Street, London, WC1E 7AE U.K.

University College London, Gower Street, London, WC1E 6BT U.K.

We thank four anonymous referees and the Editor for helpful comments. This research has greatly benefited from discussions with Joe Altonji, Mike Brewer, David Card, Jim Heckman, Enrico Moretti, Hamish Low, and Corina Mommaerts. We are also grateful to participants at the EEA Summer Meetings, the IZA/SOLE transatlantic meeting, the NBER TAPES conference, and seminars at Yale University, the University of Mannheim, IFS, the University of Copenhagen, U.C. Berkeley, and the DIW for their comments. This research is funded by the ESRC Centre for the Microeconomic Analysis of Public Policy and the NCRM node Programme Evaluation for Policy Analysis, both at the IFS. Financial support from ESRC Grant RES‐000‐23‐1524 is gratefully acknowledged. Richard Blundell would like to thank the ERC under Grant MicroConLab. Costas Meghir thanks the Cowles Foundation and the ISPS at Yale and the ESRC under the Professorial Fellowship RES‐051‐27‐0204 for funding. The usual disclaimer applies. Search for more papers by this author