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The Economics and Econometrics of Evidence-Based Policy


  • Credit value: 15 credits at Level 7
  • Convenor and tutorDaniel Kaliski
  • Prerequisite: Microeconomics module
  • Assessment: a two-hour examination (100%)

Module description

This module will enable you to assess various rationales for public intervention in economic activity; to examine the range of intervention in modern developed economies; evaluate the success and failure of programmes through careful econometric analysis of available evidence, or generating new evidence through RCTs; and to construct a template for better design of evidence-based policy. It will appeal especially to students working, or planning to work, in Whitehall departments, other public-sector organisations or private consultancies that engage with the public sector.

Indicative module syllabus

  • The Economics of Government Programmes and Taxation
    • Reasons for government involvement in markets: market failure; redistribution; social insurance
    • Transfer programs: universal transfers (UBI); means testing; targeting of subpopulations; incentive effects: labour supply/fertility
    • Social insurance: unemployment insurance; health insurance; problems: moral hazard/adverse selection/advantageous selection
    • Optimal taxation: of labour income; of commodities; of capital income
  • The Econometrics of Programme Evaluation
    • The logic of randomised controlled trials: counterfactuals and potential outcomes; treatment effects; field experiments; distributional treatment effects
    • Economic theory and RCTs: role of theory in interpreting experimental estimates; relationship of experimental estimates to behavioral elasticities of interest; natural experiments
    • Bunching estimators in the study of optimal taxation: labour supply; revenue maximisation
    • Regression-discontinuity designs
    • Difference-in-differences
    • Instrumental variables: policy variation as an IV; assignment as an IV for take-up; potential pitfalls: weak identification/correlations among the instruments/violation of underlying assumptions

Learning objectives

By the end of this module, you will be able to:

  • explain the rationales for public intervention in economic activity
  • outline the qualitative differences between different categories of public interventions
  • understand the strengths and weaknesses of RCTs, be able to design them and interpret their findings
  • understand the range of other econometric techniques that can be deployed for evaluating public programmes
  • design your own empirical studies using quasi-experimental methods
  • explain the importance of evidence in policy design, and in the process improve public policy
  • read and understand economics papers relevant to policy questions of interest
  • show awareness of the theoretical assumptions underlying an inference from data.