Template-Type: ReDIF-Paper 1.0
Title: Structural Models for Policy-Making
Author-Name: Philipp Eisenhauer
Author-Email: peisenha@uni-bonn.de
Author-Name: Lena Janys
Author-Email: ljanys@uni-bonn.de
Author-Name: Christopher Walsh
Author-Email: christopher.walsh@uni-ulm.de
Author-Name: Janós Gabler
Author-Email: janos.gabler@uni-bonn.de
Classification-JEL: D81, C44, J01
Keywords: Decision-Making under uncertainty, Structural Microeconomics

Abstract: The ex-ante evaluation of policies using structural econometric models is based on
estimated parameters as a stand-in for the true parameters. This practice ignores
uncertainty in the counterfactual policy predictions of the model. We develop a
generic approach that deals with parametric uncertainty using uncertainty sets and
frames model-informed policy-making as a decision problem under uncertainty. The
seminal human capital investment model by Keane and Wolpin (1997) provides a
well-known, influential, and empirically-grounded test case. We document considerable 
uncertainty in the models’s policy predictions and highlight the resulting policy
recommendations obtained from using different formal rules of decision-making under uncertainty.

Note: 
Length: 43
Creation-Date: 2023-12
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp484
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2023_484