Welfare Analysis Meets Causal Inference

Bibliographic Data

ID4029671
AuthorsAmy Finkelstein (0000-0002-9941-6684, Amy Finkelstein is Professor of Economics, Massachusetts Institute of Technology, Cambridge, Massachusetts.), Nathaniel Hendren (0000-0002-6385-6506, Nathaniel Hendren is Professor of Economics, Harvard University, Cambridge, Massachusetts.)
Year2020
Volume34
Issue4
Pages146-167
Publication date2020-11-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.34.4.146
OpenAlexW3047877081
LanguageEN
Citations received14
References cited14

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

Causal inference · Econometrics · Economic growth · Economics · Empirical research · Inference · Macroeconomics · Marginal cost · Marginal utility · Marginal value · Microeconomics · Policy analysis · Public economics · Public finance · Public policy · Welfare · Economic and Environmental Valuation · Fiscal Policy and Economic Growth · Gender, Labor, and Family Dynamics · Public Administration