Sufficient Statistics Revisited

Henrik Kleven

No 27242, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper 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 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.

JEL-codes: D01 D04 D1 D6 H0 H2 H3 J08 J2 J38 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-ecm
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Citations: View citations in EconPapers (11)

Published as Henrik J. Kleven, 2021. "Sufficient Statistics Revisited," Annual Review of Economics, vol 13(1), pages 515-538.

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