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Observed Choice and Optimism in Estimating the E ects of Government Policies

By Forthcoming Public Choice, Eric Rasmusen and Erasmuse Eric Rasmusen

Abstract

A policy will be used more heavily in a time and place where its cost is lower. The analyst who treats times and places as identical will overestimate the policy's net bene t, especially for policy intensities greater than exist in his sample. In regression analysis, the problem can be solved by weighted instrumental variables. Using state-level data, the technique substantially increases the estimated responsiveness of illegitimacy to transfers

Topics: Iwould like to thank Robert Barsky, Trudy Cameron, John Garen
Year: 1996
OAI identifier: oai:CiteSeerX.psu:10.1.1.197.1518
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