Economic Mismeasurement and the Bias in Policy Choice

Gareth D. Myles

Journal of Public Economic Theory, 2001, vol. 3, issue 2, 139-166

Abstract: The level of economic activity is never measured perfectly because of problems of definition, inaccuracies in data collection, and the existence of the hidden economy. Such mismeasurement implies that government policies based on official statistics can be optimal only by chance. The analysis formalizes this observation in a two‐sector economy and attempts to quantify the direction and extent of the bias introduced into policy by the failure to account for the true size of the economy. It is shown that short‐term reform (which need not balance the government budget) can be detrimental. When a budget constraint is imposed, this ensures that reforms will be beneficial no matter how bad is the mismeasurement.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/1097-3923.00059

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:3:y:2001:i:2:p:139-166

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923

Access Statistics for this article

Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders

More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().