Sensitivity Analyses of the Deterrence Hypothesis: Let's Keep the Econ in Econometrics
State University of New York at Buffalo - Department of Economics; National Bureau of Economic Research (NBER); University of Chicago - University of Chicago Press; Institute for the Study of Labor (IZA)
SUNY at Buffalo, College of Arts & Sciences, Department of Economics
Journal of Law & Economics, Vol. 42, No. 1, pp. 455-87, April 1999
Leamer and McManus applied Extreme Bound Analysis (EBA) in an empirical study of the deterrent effects of capital punishment and other penalties. Their analysis has questioned the validity of the deterrence hypothesis. The thrust of our paper is twofold: first, by applying EBA to well-known econometric models of demand, production, and human-capital investment, our analysis exposes and illustrates the inherent flaws of EBA as a method of deriving valid inferences about model specification. Second, since the analysis shows Leamer and McManus's inferences about deterrence to be based on a flawed methodology, we offer an alternative, theorybased sensitivity analysis of estimated deterrent effects using similar data. Our analysis supports the deterrence hypothesis. More generally, it emphasizes the indispensable role of theory in guiding sensitivity analyses of model specification.
Number of Pages in PDF File: 34Accepted Paper Series
Date posted: February 7, 2007
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