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Debopam Bhattacharya (University of Cambridge), Incorporating Social Welfare in Program-Evaluation and Treatment Choice (with Tatiana Komarova)

Marcel-Dagenais Econometrics Seminar 2021-2022

joint with the Département de sciences économiques, Université de Montréal

OrganizerKarim Chalak (U. de Montréal)

*  Invitation only. Please contact the organizer if you would like access. 

RÉSUMÉ: The econometric literature on program-evaluation and optimal treatment-choice takes functionals of outcome-distributions as `social-welfare’ and ignores program impacts on unobserved utilities, whereas the utility-based welfare analysis tradition in public finance ignores unobserved heterogeneity in individual preferences. This paper reconciles the econometric and public-finance approaches to welfare analysis in the practically important setting of discrete-choice. We show that under unrestricted preference heterogeneity and income-effects, the distribution of individual indirect utility is nonparametrically identified from average demand. This enables cost-benefit analysis of non-marginal policy-interventions and their optimal targeting based on planners’ re-distributional preferences. Our methods are illustrated via empirical analyses of an experimental and an observational dataset.

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