Welfare analysis meets causal inference
Name
jep.34.4.146.pdf
Description
Published version
Size
748.43 KB
Format
Adobe PDF
Checksum (MD5)
f67e70bb580f3d85c187c96a59119967
Author(s)
Finkelstei, Amy
Hendren, Nathaniel
Date Issued
September 2020
Journal
Journal of Economic Perspectives
Publisher
American Economic Association
Citation
Finkelstein, Amy and Nathaniel Hendren. “Welfare analysis meets causal inference.” Journal of Economic Perspectives, 34, 4 (September 2020): 146–167 © 2020 The Author(s)
Version
Final published version
Abstract
We describe a frame work for empirical welfare analysis that uses the causal estimates of a policy’s impact on net government spending. This framework provides guidance for which causal effects are (and are not) needed for empirical welfare analysis of public policies. The key ingredient is the construction of each policy’s marginal value of public funds (MVPF). The MVPF is the ratio of beneficiaries’ willingness to pay for the policy to the net cost to the government. We discuss how the MVPF relates to “traditional” welfare analysis tools such as the marginal excess burden and marginal cost of public funds. We show how the MVPF can be used in practice by applying it to several canonical empirical applications from public finance, labor, development, trade, and industrial organization.
MIT Department
Massachusetts Institute of Technology. Department of Economics
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/JEP.34.4.146
