Sufficient Statistics Revisited

Henrik J. Kleven ()
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Henrik J. Kleven: Department of Economics and School of Public and International Affairs, Princeton University, Princeton, New Jersey 08544, USA

Annual Review of Economics, 2021, vol. 13, issue 1, 515-538

Abstract: This article reviews and generalizes the sufficient statistics approach to policy evaluation. The idea of the approach is that the welfare effect of policy changes can be expressed in terms of estimable reduced-form elasticities, allowing for policy evaluation without estimating the structural primitives of fully specified models. The approach relies on three assumptions: that policy changes are small, that government policy is the only source of market imperfection, and that a set of high-level restrictions on the environment and on preferences can be used to reduce the number of elasticities to be estimated. We generalize the approach in all three dimensions. It is possible to develop transparent sufficient statistics formulas under very general conditions, but the estimation requirements increase greatly. Starting from such general formulas elucidates that feasible empirical implementations are in fact structural approaches.

Keywords: sufficient statistics; elasticities; welfare analysis; fiscal externality; structural approach; discrete reforms (search for similar items in EconPapers)
JEL-codes: D04 D10 D60 H20 H30 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:anr:reveco:v:13:y:2021:p:515-538

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DOI: 10.1146/annurev-economics-060220-023547

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