Viewpoint: Estimating the Causal Effects of Policies and Programs

43 Pages Posted: 8 Aug 2016

See all articles by Jeffrey A. Smith

Jeffrey A. Smith

University of Wisconsin - Madison; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Arthur Sweetman

McMaster University - Department of Economics; McMaster University - Centre for Health Economics and Policy Analysis (CHEPA); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Abstract

Estimation, inference and interpretation of the causal effects of programs and policies have all advanced dramatically over the past 25 years. We highlight three particularly important intellectual trends: an improved appreciation of the substantive importance of heterogeneous responses and of their methodological implications, a stronger focus on internal validity brought about by the "credibility revolution," and the scientific value that follows from grounding estimation and interpretation in economic theory. We discuss a menu of commonly employed partial equilibrium approaches to the identification of causal effects, emphasizing that the researcher's central intellectual contribution always consists of making an explicit case for a specific causal interpretation given the relevant economic theory, the data, the institutional context and the economic question of interest. We also touch on the importance of general equilibrium effects and full cost-benefit analyses.

Keywords: causal effects, heterogeneous treatment effects, partial equilibrium identification

JEL Classification: C18, C21, C26, C50, C90

Suggested Citation

Smith, Jeffrey Andrew and Sweetman, Arthur, Viewpoint: Estimating the Causal Effects of Policies and Programs. IZA Discussion Paper No. 10108. Available at SSRN: https://ssrn.com/abstract=2819390

Jeffrey Andrew Smith (Contact Author)

University of Wisconsin - Madison

716 Langdon Street
Madison, WI 53706-1481
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Arthur Sweetman

McMaster University - Department of Economics ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

McMaster University - Centre for Health Economics and Policy Analysis (CHEPA) ( email )

1280 Main St. W
Hamilton, ON L8S 4M4
Canada

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
231
PlumX Metrics