TY  - JOUR
AU  - Hendren, Nathaniel
TI  - The Policy Elasticity
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19177
PY  - 2013
Y2  - June 2013
DO  - 10.3386/w19177
UR  - http://www.nber.org/papers/w19177
L1  - http://www.nber.org/papers/w19177.pdf
N1  - Author contact info:
Nathaniel Hendren
Harvard University
Department of Economics
Littauer Center Room 235
Cambridge, MA 02138
Tel: 773/344-8990
E-Mail: nhendren@gmail.com
M1  - published as Nathaniel Hendren. "The Policy Elasticity," in Jeffrey R. Brown, editor, "Tax Policy and the Economy, Volume 30" University of Chicago Press (2016)

AB  - This paper illustrates how one can use causal effects of a policy change to measure its welfare impact without decomposing them into income and substitution effects. Often, a single causal effect suffices: the impact on government revenue. Because these responses vary with the policy in question, I term them policy elasticities, to distinguish them from Hicksian and Marshallian elasticities. The model also formally justifies a simple benefit-cost ratio for non-budget neutral policies. Using existing causal estimates, I apply the framework to five policy changes: top income tax rate, EITC generosity, food stamps, job training, and housing vouchers.
ER  -