Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods

Raj Chetty

Scholarly Articles from Harvard University Department of Economics

Abstract: The debate between structural and reduced-form approaches has generated substantial controversy in applied economics. This article reviews a recent literature in public economics that combines the advantages of reduced-form strategies—transparent and credible identification—with an important advantage of structural models—the ability to make predictions about counterfactual outcomes and welfare. This literature has developed formulas for the welfare consequences of various policies that are functions of reduced-form elasticities rather than structural primitives. I present a general framework that shows how many policy questions can be answered by estimating a small set of sufficient statistics using program-evaluation methods. I use this framework to synthesize the modern literature on taxation, social insurance, and behavioral welfare economics. Finally, I discuss problems in macroeconomics, labor, development, and industrial organization that could be tackled using the sufficient statistic approach.

Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (424)

Published in Annual Review of Economics

Downloads: (external link)
http://dash.harvard.edu/bitstream/handle/1/9748528/suffstat_ar.pdf (application/pdf)

Related works:
Journal Article: Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods (2009)
Working Paper: Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods (2008)
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:hrv:faseco:9748528

Access Statistics for this paper

More papers in Scholarly Articles from Harvard University Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Office for Scholarly Communication ().