Working Paper: NBER ID: w30850
Authors: Omar Alubaydli; Chienyu Lai; John A. List
Abstract: The “voltage effect” is defined as the tendency for a program’s efficacy to change when it is scaled up, which in most cases results in the absolute size of a program’s treatment effects to diminish when the program is scaled. Understanding the scaling problem and taking steps to diminish voltage drops are important because if left unaddressed, the scaling problem can weaken the public’s faith in science, and it can lead to a misallocation of public resources. There exists a growing literature illustrating the prevalence of the scaling problem, explaining its causes, and proposing countermeasures. This paper adds to the literature by providing a simple model of the scaling problem that is consistent with rational expectations by the key stakeholders. Our model highlights that asymmetric information is a key contributor to the voltage effect.
Keywords: scaling problem; voltage effect; asymmetric information; public policy; treatment effects
JEL Codes: C93; D61; D90
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Asymmetric information (D82) | voltage effect (L94) |
| Researchers' private information (C81) | biased reporting of treatment effects (C90) |
| biased reporting of treatment effects (C90) | government’s decision-making (D70) |
| government’s decision-making (D70) | implementation of the program (C88) |
| Researchers' private information (C81) | implementation of the program (C88) |
| Shortsighted researchers (G41) | scaling problem (R12) |
| government’s decision-making (D70) | scaling problem (R12) |