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Partial identification, distributional preferences, and the welfare ranking of policies


  • Kasy, Maximilian


Many methodological debates in microeconometrics are driven by the tension between ``what we can get'' (identification) and ``what we want'' (parameters of interest). This paper proposes to consider models of policy choice which allow for a joint formal discussion of both issues. We consider a non-standard empirical object of interest, the ranking of counterfactual policies. This paper connects the literatures on partial identification and on ambiguity, where partially identified policy rankings are formally analogous to choice under Knightian uncertainty. Partial identification of conditional average treatment effects maps into a partial ordering of treatment assignment policies in terms of social welfare. This paper gives geometric characterizations of the identified partial ordering of policies, and derives conditions for restricted policy sets to be completely ordered or completely unordered. Such conditions map sets of feasible policies into requirements on data that allow to rank these policies. Generalizing to non-linear objective functions, it is then shown that policy effects are partially identified if and only if the policy objective is a robust statistic in the sense of having a bounded influence function. Furthermore, rankings derived from a linearized version of the objective function give correct rankings in a neighborhood of a status quo policy, and are easy to calculate in practice. The theoretical results of this paper are applied to data from the ``project STAR'' experiment, in which children were randomly assigned to classes of different sizes. This application illustrates the dependence of identifiability of the policy ranking on identifying assumptions, the feasible policy set, and distributional preferences.

Suggested Citation

  • Kasy, Maximilian, "undated". "Partial identification, distributional preferences, and the welfare ranking of policies," Working Paper 32846, Harvard University OpenScholar.
  • Handle: RePEc:qsh:wpaper:32846

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    References listed on IDEAS

    1. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR;CES;MSH, vol. 16(32), pages 51-82, April.
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    3. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    5. Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Chapter 1," MPRA Paper 17452, University Library of Munich, Germany.
    6. Martin Lettau & Jessica A. Wachter, 2007. "Why Is Long-Horizon Equity Less Risky? A Duration-Based Explanation of the Value Premium," Journal of Finance, American Finance Association, vol. 62(1), pages 55-92, February.
    7. Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
    8. Constantinescu, Mihnea & Francke, Marc, 2013. "The historical development of the Swiss rental market – A new price index," Journal of Housing Economics, Elsevier, vol. 22(2), pages 135-145.
    9. Nigel Stapledon, 2012. "Trends and Cycles in S ydney and M elbourne House Prices from 1880 to 2011," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 52(3), pages 293-317, November.
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    Cited by:

    1. Susan Athey & Stefan Wager, 2017. "Efficient Policy Learning," Papers 1702.02896,, revised Oct 2017.
    2. repec:bos:wpaper:wp2013-001 is not listed on IDEAS
    3. Epstein, Larry G. & Seo, Kyoungwon, 2015. "Exchangeable capacities, parameters and incomplete theories," Journal of Economic Theory, Elsevier, vol. 157(C), pages 879-917.

    More about this item

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis


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