# MOD. 2 POLICY IMPACT ASSESSMENT

**A.A. di erogazione 2014/2015**

**Docenti**

MOD. 1 Econometrics of Industrial Organizations

MOD. 2 Policy Impact Assessment

The most trivial competence that the student should obtain from the course is to master the interpretation of the results of OLS, IV and 2SLS estimation. More ambitiously, the course aims at teaching something about the scientific method, namely how statistical inference can help in testing hypotheses and which arrangements have to be done to this procedure in a complex context such as the economic environment.

Mode of Delivery: The course will be composed of 40 hours of classical lectures.

MOD. 1 Econometrics of Industrial Organizations

MOD. 2 Policy Impact Assessment

None

The objective of the course is to provide the students with some econometric tools

for the analysis of the behavior of industries and markets: the tools covered are the linear regression model, as estimated through ordinary least squares or through instrumental variables, and the simultaneous equations model.

MOD1: We deal with the econometric analysis of prices and quantities in competitive markets.

The classical way to analyse the market equilibrium, i.e. the mechanism for which a certain amount of a good is sold at a certain price in a competitive market, is to see it as the intersection of a demand and of a supply curve. The former is obtained as the aggregation over consumers of the individual demand curves given by the optimization of the consumer’s utility under the budget constraint. The latter is similarly obtained aggregating over firms the individual supply curves that are the result of profit optimization when the price is taken as given. We will follow this derivation, but we will remark, whenever possible, the weaknesses arising in this way of addressing the problem. In particular, in mainstream economic theory, the firm has often been considered as a "black box". As this approach is hardly satisfactory, we will first take a look inside the black box and will describe the productive structure of the firm using the concepts of production frontier and efficiencies. Then, we will consider the demand behavior of consumers in the simplified case in which no demand shift takes place;even if this situation is rare in the real world, it provides a useful benchmark for the study of more complex cases.Then we turn to analyze the interaction between firms and consumers in real competitive markets. The first topic covered in this part concerns the diffusion of new products: this describes a situation in which the interaction among firms and between firms and consumers is still limited; the treatment of the topic will benefit from insights from marketing. The second topic will deal with the relation between prices and sales in real markets when both supply and demand are affected by shifts: we will present econometric tools for the estimation of demand and supply functions, namely simultaneous equations models.

MOD2:In particular, we study the impact of policy interventions on economic agents in regulated markets.We aim at estimating not simply a purely descriptive relationship among the variables appearing in the economic problem, but the causal relationship linking them.This because, when the objective is to study the effect of a policy change on the behavior of individuals, we would like to use the estimated relation to simulate the effect of alternative circumstances on the economic reality.For this it is important to be sure that the regression estimates obtained through ordinary least squares or instrumental variables techniques can be interpretable as direct estimates of the parameters of interest.In natural sciences,this problem is generally solved through a careful design of the experiment in which data are collected.In social sciences, this is generally impossible as classical controlled experiments are often unfeasible because of economic or ethical constraints.Therefore, we are compelled to use more refined inferential techniques(in general instrumental variables estimation in its several variants)to obtain causal relations from observational data.In this part of the course,we will deal with these problems.In particular,we will describe the design of controlled experiments and we will see in which sense economic data do not comply with the standards of this class of experiments. Then we will describe the techniques that can be used to infer causal relationships in the absence of experimental data.

MOD. 1 Econometrics of Industrial Organizations

MOD. 2 Policy Impact Assessment

The course will be based on a set of slides written by the lecturer. A list of academic papers addressing more advanced topics will be provided to the students as additional readings. Mathematical derivations will be dealt with in handouts written by the lecturer.

Assessment

Students will be evaluated on the basis of a written essay in which they discuss a published paper.