Near identification of policy trade-offs using preference proxies to elicit hidden information in the linear case
No 16-642, TSE Working Papers from Toulouse School of Economics (TSE)
This paper shows that neither OLS nor 2SLS can generically identify policy trade offs in the linear case, except under extreme assumptions. Practitioners have to be content with near identification and the paper discusses how to choose between these two methods. It shows that a two-stage approach using preference proxies to elicit hidden information can potentially narrow the identification gap and that a simple specification test can be used to assess whether these proxies really contribute to improving identification.
Keywords: Policy trade offs; near identification; preference proxies (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:30422
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