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Sufficient Statistics Revisited

Authors
  • Kleven, Henrik J.
Type
Published Article
Journal
Annual Review of Economics
Publisher
Annual Reviews
Publication Date
Aug 05, 2021
Volume
13
Pages
515–538
Identifiers
DOI: 10.1146/annurev-economics-060220-023547
Source
Annual Reviews
Keywords
License
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Abstract

This article reviews and generalizes the sufficient statistics approach to policy evaluation. The idea of the approach is that the welfare effect of policy changes can be expressed in terms of estimable reduced-form elasticities, allowing for policy evaluation without estimating the structural primitives of fully specified models. The approach relies on three assumptions: that policy changes are small, that government policy is the only source of market imperfection, and that a set of high-level restrictions on the environment and on preferences can be used to reduce the number of elasticities to be estimated. We generalize the approach in all three dimensions. It is possible to develop transparent sufficient statistics formulas under very general conditions, but the estimation requirements increase greatly. Starting from such general formulas elucidates that feasible empirical implementations are in fact structural approaches.

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