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Near identification of policy trade-offs using preference proxies to elicit hidden information in the linear case

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  • Azam, Jean-Paul

Abstract

This paper shows that neither OLS nor 2SLS can generically identify policy trade offs in the linear case, except under extreme assumptions. Practitioners have to be content with near identification and the paper discusses how to choose between these two methods. It shows that a two-stage approach using preference proxies to elicit hidden information can potentially narrow the identification gap and that a simple specification test can be used to assess whether these proxies really contribute to improving identification.

Suggested Citation

  • Azam, Jean-Paul, 2016. "Near identification of policy trade-offs using preference proxies to elicit hidden information in the linear case," TSE Working Papers 16-642, Toulouse School of Economics (TSE).
    • Handle: RePEc:tse:wpaper:30422
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    References listed on IDEAS

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    1. Halbert White & Karim Chalak, 2013. "Identification and Identification Failure for Treatment Effects Using Structural Systems," Econometric Reviews, Taylor & Francis Journals, vol. 32(3), pages 273-317, November.
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    4. Boone, Peter, 1996. "Politics and the effectiveness of foreign aid," European Economic Review, Elsevier, vol. 40(2), pages 289-329, February.
    5. Andrews,Donald W. K. & Stock,James H. (ed.), 2005. "Identification and Inference for Econometric Models," Cambridge Books, Cambridge University Press, number 9780521844413, January.
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