Partial Distributional Policy Effects

Authors

  • Christoph Rothe

    1. Dept. of Economics, Columbia University, 420 West 118th Street, New York, NY 10025, U.S.A.; cr2690@columbia.edu
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    • I thank the co-editor, the referees, Joshua Angrist, Andrew Chesher, Sergio Firpo, Bernd Fitzenberger, Myoung-jae Lee, Thomas Lemieux, Thierry Magnac, and conference/seminar participants at ESEM 2009 Barcelona, EALE/SOLE 2010 Meeting London, EC2 Meeting 2010 Toulouse, ESEM 2011 Oslo, EIEF Rome, St. Gallen, Oxford and Mannheim for helpful comments, and Nicole Fortin for making the data from Fortin, Lemieux, and Firpo (2011) available. The usual disclaimer applies.


Abstract

In this paper, we propose a method to evaluate the effect of a counterfactual change in the unconditional distribution of a single covariate on the unconditional distribution of an outcome variable of interest. Both fixed and infinitesimal changes are considered. We show that such effects are point identified under general conditions if the covariate affected by the counterfactual change is continuously distributed, but are typically only partially identified if its distribution is discrete. For the latter case, we derive informative bounds, making use of the available information. We also discuss estimation and inference.

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