Working Paper: NBER ID: w27556
Authors: Marco Stenborg Petterson; David G. Seim; Jesse M. Shapiro
Abstract: We study the problem of learning about the effect of one market-level variable (e.g., price) on another (e.g., quantity) in the presence of shocks to unobservables (e.g., preferences). We show that economic intuitions about the plausible size of the shocks can be informative about the parameter of interest. We illustrate with a main application to the grain market.
Keywords: restrictions on shocks; demand; supply; identification
JEL Codes: C22; C32; D41; Q11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Economic intuitions about the size of fluctuations in unobservables (E32) | Price elasticity of demand (D12) |
| Larger fluctuations in unobservables (preferences) (D89) | More negative price elasticity of demand (D12) |
| Price variations (E30) | Larger fluctuations in unobservables (preferences) (D89) |
| Bounds on the size of shocks (C51) | Lower bounds on the size of true shocks (C51) |