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Observed Choice, Estimation, and Optimism About Policy Changes

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  • Eric Rasmusen

    (Indiana University School of Business)

Abstract

A policy will be used more heavily in a particular time and place where its marginal cost is lower. The analyst who treats times and places as identical will overestimate the policy's net benefit, especially for policy intensities greater than exist in his sample. In regression analysis, the problem can be solved by instrumental variables and a correction for heteroskedasticity. In an example using state-level data, the technique substantially increases the estimated responsiveness of the illegitimacy rate to transfer payments.

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Bibliographic Info

Paper provided by EconWPA in its series Econometrics with number 9506004.

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Date of creation: 14 Jun 1995
Date of revision: 16 Jun 1995
Handle: RePEc:wpa:wuwpem:9506004

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  1. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  2. Kniesner, Thomas J & McElroy, Marjorie B & Wilcox, Steven P, 1988. "Getting into Poverty without a Husband, and Getting Out, With or Without," American Economic Review, American Economic Association, vol. 78(2), pages 86-90, May.
  3. Ellwood, David T & Crane, Jonathan, 1990. "Family Change among Black Americans: What Do We Know?," Journal of Economic Perspectives, American Economic Association, vol. 4(4), pages 65-84, Fall.
  4. Charles R. Nelson & Richard Startz, 1988. "Some Further Results on the Exact Small Sample Properties of the Instrumental Variable Estimator," NBER Technical Working Papers 0068, National Bureau of Economic Research, Inc.
  5. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-33, June.
  6. Stephen A. Woodbury & Robert G. Spiegelman, . "Bonuses to Workers and Employers to Reduce unemployment: Randomized Trials in Illinois," Upjohn Working Papers and Journal Articles sawrgs1987, W.E. Upjohn Institute for Employment Research.
  7. Garen, John, 1984. "The Returns to Schooling: A Selectivity Bias Approach with a Continuous Choice Variable," Econometrica, Econometric Society, vol. 52(5), pages 1199-1218, September.
  8. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  9. Heckman, James, 2013. "Sample selection bias as a specification error," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 31(3), pages 129-137.
  10. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
  11. Garen, John E., 1987. "Relationships among estimators of triangular econometric models," Economics Letters, Elsevier, vol. 25(1), pages 39-41.
  12. Heckman, James J. & Robb, Richard Jr., 1985. "Alternative methods for evaluating the impact of interventions : An overview," Journal of Econometrics, Elsevier, vol. 30(1-2), pages 239-267.
  13. Peter Kennedy, 2003. "A Guide to Econometrics, 5th Edition," MIT Press Books, The MIT Press, edition 5, volume 1, number 026261183x, December.
  14. William A. Darity & Samuel L. Myers, 1990. "Impacts Of Violent Crime On Black Family Structure," Contemporary Economic Policy, Western Economic Association International, vol. 8(4), pages 15-29, October.
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