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Taking the Dogma out of Econometrics: Structural Modeling and Credible Inference

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  • Aviv Nevo
  • Michael D. Whinston

Abstract

Without a doubt, there has been a "credibility revolution" in applied econometrics. One contributing development has been in the improvement and increased use in data analysis of "structural methods"; that is, the use of models based in economic theory. Structural modeling attempts to use data to identify the parameters of an underlying economic model, based on models of individual choice or aggregate relations derived from them. Structural estimation has a long tradition in economics, but better and larger data sets, more powerful computers, improved modeling methods, faster computational techniques, and new econometric methods such as those mentioned above have allowed researchers to make significant improvements. While Angrist and Pischke extol the successes of empirical work that estimates "treatment effects" based on actual or quasi-experiments, they are much less sanguine about structural analysis and hold industrial organization up as an example where "progress is less dramatic." Indeed, reading their article one comes away with the impression that there is only a single way to conduct credible empirical analysis. This seems to us a very narrow and dogmatic approach to empirical work; credible analysis can come in many guises, both structural and nonstructural, and for some questions structural analysis offers important advantages. In this comment, we address the criticism of structural analysis and its use in industrial organization, and consider why empirical analysis in industrial organization differs in such striking ways from that in fields such as labor, which have recently emphasized the methods favored by Angrist and Pischke.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.24.2.69
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 24 (2010)
Issue (Month): 2 (Spring)
Pages: 69-82

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Handle: RePEc:aea:jecper:v:24:y:2010:i:2:p:69-82

Note: DOI: 10.1257/jep.24.2.69
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  1. Nevo, Aviv, 1999. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Competition Policy Center, Working Paper Series qt7cm5p858, Competition Policy Center, Institute for Business and Economic Research, UC Berkeley.
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Cited by:
  1. Aguzzoni, Luca & Argentesi, Elena & Ciari, Lorenzo & Duso, Tomaso & Tognoni, Massimo, 2013. "Ex-post merger evaluation in the UK retail market for books," DICE Discussion Papers 98, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  2. L. Aguzzoni & E. Argentesi & P. Buccirossi & L. Ciari & T. Duso & M. Tognoni & C. Vitale, 2013. "They Played the Merger Game: A Retrospective Analysis in the UK Videogames Market," Working Papers wp908, Dipartimento Scienze Economiche, Universita' di Bologna.
  3. Marie-Laure Allain & Claire Chambolle & Stéphane Turolla & Sofia B. Villas-Boas, 2013. "The Impact of Retail Mergers on Food Prices : Evidence from France," Working Papers 2013-18, Centre de Recherche en Economie et Statistique.
  4. Duso, Tomaso & Argentesi, Elena & Aguzzoni, Luca & Ciari, Lorenzo & Tognoni, Massimo, 2013. "Ex Post Merger Evaluation in the UK Book Retail Market," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80025, Verein für Socialpolitik / German Economic Association.
  5. Henk Folmer & Olof Johansson-Stenman, 2011. "Does Environmental Economics Produce Aeroplanes Without Engines? On the Need for an Environmental Social Science," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(3), pages 337-361, March.
  6. James J. Heckman, 2010. "Building Bridges Between Structural and Program Evaluation Approaches to Evaluating Policy," NBER Working Papers 16110, National Bureau of Economic Research, Inc.

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