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“Structural vs. Reduced Form” - Yale University

structural vs. Reduced Form Language, Confusion, and Modelsin Empirical EconomicsPhil HaileNovember 20211 Types of Empirical Economics?1. Measurement how much do prices change with the number of competitors? how has productivity ( , TFP) in the auto industrychanged over the last 30 years? what is the effect of college attendance on expected wage? what is the elasticity of demand for health insurance in MA?2. Model Testing is there moral hazard in auto insurance? does BNE explain bidding at oil auctions? do actual contracts resemble optimal contracts?3. Model Estimation for Counterfactuals how much would prices rise two firms merged? if the sales taxincreased by 1%? how would student outcomes differ under a different schoolchoice mechanism?

Structural: estimate features of a data generating process (i.e., a model) that are (assumed to be) invariant to the policy changes or other counterfactuals of interest estimate demand for schools→predict outcomes under a voucher system ... •firm has marginal costc ...

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