Research & Publications
Observed Choice, Estimation, and Optimism about Policy Changes
1998, Public Choice
Eric Bennett Rasmusen
A policy will be used more heavily in a time and place where its cost is lower. The analyst who treats times and places as identical will overestimate the policy's net benefit, especially for policy intensities greater than exist in his sample. In regression analysis, the problem can be solved by instrumental variables. Using state-level data, the technique substantially increases the estimated responsiveness of illegitimacy to transfers. Copyright 1998 by Kluwer Academic Publishers
Rasmusen, Eric Bennett (1998), "Observed Choice, Estimation, and Optimism about Policy Changes," Public Choice, Vol. 97, Nos. 1-2, October, 65-91.