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Let’s Call their Bluff: The Politics of Econometric Methodology

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  • Azam, Jean-Paul

Abstract

This short paper focuses on econometric issues raised by intentional government interventions aimed at influencing some politically sensitive outcomes. It first presents an example where multiple regression analysis provides quite a misleading diagnosis about foreign aid and immigration that can be rectified by using a causal analysis based on instrumental variables. It then offers a simple theoretical framework to bring out the basic information asymmetries affecting the game between the econometrician and the policy maker and their implications for the choice of instruments in a near-identification strategy. This approach is shown to provide a strong political judgement in the case of the armed violence between local governments and "Maoist" insurgents in eight states of India. Proper econometric analysis shows that the initiative of the insurgency cannot be blamed on the rebels.
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  • Azam, Jean-Paul, 2019. "Let’s Call their Bluff: The Politics of Econometric Methodology," TSE Working Papers 19-1030, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:123287
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    References listed on IDEAS

    as
    1. Jean-Paul Azam & Kartika Bhatia, 2017. "Provoking insurgency in a federal state: theory and application to India," Public Choice, Springer, vol. 170(3), pages 183-210, March.
    2. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    3. Arndt, Channing & Jones, Sam & Tarp, Finn, 2015. "Assessing Foreign Aid’s Long-Run Contribution to Growth and Development," World Development, Elsevier, vol. 69(C), pages 6-18.
    4. Nakamura, Alice & Nakamura, Masao, 1981. "On the Relationships among Several Specification Error Tests Presented by Durbin, Wu, and Hausman," Econometrica, Econometric Society, vol. 49(6), pages 1583-1588, November.
    5. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    6. Justin Yifu Lin & Boris Pleskovic, 2010. "Annual World Bank Conference on Development Economics--Global 2009 : People, Politics, and Globalization," World Bank Publications - Books, The World Bank Group, number 2471.
    Full references (including those not matched with items on IDEAS)

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