Interpreting Pre-Trends as Anticipation: Impact on Estimated Treatment Effects from Tort Reform

50 Pages Posted: 3 Aug 2015

See all articles by Anup Malani

Anup Malani

University of Chicago - Law School; University of Chicago Pritzker School of Medicine; Resources for the Future; National Bureau of Economic Research (NBER)

Julian Reif

University of Illinois at Urbana-Champaign

Date Written: August 1, 2015

Abstract

While conducting empirical work, researchers sometimes observe changes in outcomes before adoption of a new policy. The conventional diagnosis is that treatment is endogenous. This observation is also consistent, however, with anticipation effects that arise naturally out of many theoretical models. This paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects. It provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects' expectations are unobservable. Finally, this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them. Interpreting pre-trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation.

Keywords: anticipation, medical malpractice, endogeneity, tort reform

JEL Classification: C50, K13, J20

Suggested Citation

Malani, Anup and Reif, Julian, Interpreting Pre-Trends as Anticipation: Impact on Estimated Treatment Effects from Tort Reform (August 1, 2015). Journal of Public Economics, Vol. 124, 2015. Available at SSRN: https://ssrn.com/abstract=2638726

Anup Malani

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9602 (Phone)
773-702-0730 (Fax)

HOME PAGE: http://www.law.uchicago.edu/faculty/malani/

University of Chicago Pritzker School of Medicine

Chicago, IL 60637
United States

Resources for the Future

1616 P Street, NW
Washington, DC 20036
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Julian Reif (Contact Author)

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

HOME PAGE: http://www.julianreif.com

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