What Have We Learned from Structural Models?

A structural economic model is one where the structure of decision making is incorporated in the model specification. Structural models aim to identify three distinct, but related, objects: (i) structural “deep” parameters; (ii) underlying mechanisms; (iii) policy counterfactuals. The ability to pro...

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Bibliographic Details
Published in:The American economic review 2017-05, Vol.107 (5), p.287-292
Main Author: Blundell, Richard
Format: Article
Language:English
Subjects:
Counterfactual thinking
Decision making
Economic models
LEARNING FROM DATA IN ECONOMICS
Specification
Structural models
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Summary:A structural economic model is one where the structure of decision making is incorporated in the model specification. Structural models aim to identify three distinct, but related, objects: (i) structural “deep” parameters; (ii) underlying mechanisms; (iii) policy counterfactuals. The ability to provide counterfactual predictions sets structural models apart from reduced-form models. The focus is on studies that allow a better understanding of the mechanisms underlying observed behavior and that provide reliable insights about policy counterfactuals. Emphasis is given to models that minimize assumptions on the structural function and on unobserved heterogeneity and approaches that align structural and “reduced form” moments.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.p20171116