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Welfare gains of the poor: An endogenous Bayesian approach with spatial random effects

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  • Andrés Ramírez Hassan
  • Santiago Montoya Blandón

Abstract

We introduce a Bayesian instrumental variable procedure with spatial random effects that handles endogeneity, and spatial dependence with unobserved heterogeneity. We find through a limited Monte Carlo experiment that our proposal works well in terms of point estimates and prediction. We apply our method to analyze the welfare effects generated by a process of electricity tariff unification on the poorest households. In particular, we deduce an Equivalent Variation measure where there is a budget constraint for a two-tiered pricing scheme, and find that 10% of the poorest municipalities attained welfare gains above 2% of their initial income.

Suggested Citation

  • Andrés Ramírez Hassan & Santiago Montoya Blandón, 2019. "Welfare gains of the poor: An endogenous Bayesian approach with spatial random effects," Econometric Reviews, Taylor & Francis Journals, vol. 38(3), pages 301-318, March.
    • Handle: RePEc:taf:emetrv:v:38:y:2019:i:3:p:301-318
    DOI: 10.1080/07474938.2016.1261062
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    Cited by:

    1. Andrés Ramírez–Hassan & Rosember Guerra–Urzola, 2021. "Bayesian treatment effects due to a subsidized health program: the case of preventive health care utilization in Medellín (Colombia)," Empirical Economics, Springer, vol. 60(3), pages 1477-1506, March.
    2. Andr'es Ram'irez-Hassan & Alejandro L'opez-Vera, 2021. "Semi-parametric estimation of the EASI model: Welfare implications of taxes identifying clusters due to unobserved preference heterogeneity," Papers 2109.07646, arXiv.org.

    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D60 - Microeconomics - - Welfare Economics - - - General

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