Jonathan Klick on Structural Modeling - Dictionary of Arguments
Parisi I 33
Structural modeling/economics/Gelbach/Klick: Econometric studies come in two basic flavors: structural and reduced form.
Structural modeling involves writing down an explicit mathematical and statistical representation of the determinants of individual, firm, or organizational behavior, such that these relationships can be captured with a finite collection of parameter estimates.
Demand: For example, it is a consequence of Roy’s identity that any parametric specification of individual demand for a good can be converted into a parametric utility function (see, e.g., Hausman, 1981(1); Auerbach and Feldstein, 1985(2)).
Thus, if one estimates a parametric demand equation, one is estimating parameters of individual utility functions, which are structural parameters that can be used to estimate the effects of future changes in policies.
Structural modeling is an approach that generally has not been used in empirical law and economics. *
Reduced form: see Economic models/Gelbach/Klick.
* One exception is in the field of industrial organization ("IO"), the microeconomic field that focuses on understanding how market structure affects consumer and producer welfare. Structural modeling has flourished in IO; see, e.g., Berry, Levinsohn, and Pakes (1995)(3); Gowrisankaran, Nevo, and Town (2015)(4=; Roberts and Sweeting (2013)(5). For a non-IO structural example, see Teitelbaum, Barseghyan, and Prince (2011)(6).
1. Hausman, Jerry A. (1981). “Exact Consumer’s Surplus and Deadweight Loss.” American Economic Review 71(4): 662–676.
2. Auerbach, A. J. and M. Feldstein, eds. (1985). Taxes and Labour Supply. Handbook of Public Economics. Vol. I. North-Holland: Elsevier Science Publishers B. V.
3. Berry, Steven, James Levinsohn, and Ariel Pakes (1995). “Automobile Prices in Market Equilibrium.” Econometrica 63(4): 841–890.
4. Gowrisankaran, Gautam, Aviv Nevo, and Robert Town (2015). “Mergers When Prices Are Negotiated: Evidence from the Hospital Industry.” American Economic Review 105: 172–203.
5. Roberts, James W. and Andrew Sweeting (2013). “Airline Mergers and the Potential Entry Defense.” August 29. Available at: http://public.econ.duke.edu/~jr139/pedef_airline_merger.pdf?new_window=1
6. Teitelbaum, Joshua C., Levon Barseghyan, and Jeffrey Prince (2011). “Are Risk Preferences Stable Across Contexts? Evidence from Insurance Data.” American Economic Review 101: 591–631.
Gelbach, Jonah B. and Jonathan Klick „Empirical Law and Economics“. In: Parisi, Francesco (ed) (2017). The Oxford Handbook of Law and Economics. Vol 1: Methodology and Concepts. NY: Oxford University Press._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Author1]Vs[Author2] or [Author]Vs[term] is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition.
Francesco Parisi (Ed)
The Oxford Handbook of Law and Economics: Volume 1: Methodology and Concepts New York 2017