Policy Evaluation and Analysis Flashcards
7 cards from real CEA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Policy Evaluation and Analysis flashcards as text
In difference-in-differences (DiD) estimation, the 'parallel trends' assumption requires that:
Answer: In the absence of treatment, both groups would have followed the same trend
Parallel trends assumes that the counterfactual change in outcomes for treated units equals the observed change in the control group over the same period.
An analyst finds a statistically significant program effect with p < 0.05 but the confidence interval nearly spans zero. The most appropriate interpretation is:
Answer: The effect may be statistically significant but is small or precisely zero
With large samples, trivially small effects can be statistically significant; economic and practical significance must be assessed alongside p-values.
Which of the following is an example of a 'deadweight loss' from a targeted subsidy program?
Answer: Benefits paid to individuals who would have taken the subsidized action anyway
Infra-marginal beneficiaries who would have acted without the subsidy receive windfall transfers that represent deadweight loss relative to a perfectly targeted program.
The 'Local Average Treatment Effect' (LATE) in instrumental variable estimation applies specifically to:
Answer: The effect on units whose treatment status is changed by the instrument (compliers)
LATE identifies the treatment effect only for compliers — units induced to change treatment status by variation in the instrument — not for never-takers or always-takers.
When a policy analyst applies a higher discount rate in a net present value calculation, what happens to the relative weight of future benefits?
Answer: Future benefits are discounted more steeply, reducing their present value
A higher discount rate reduces the present value of future cash flows more aggressively, making long-run benefits worth less in today's dollars.
Which concept explains why government interventions may produce worse outcomes than markets even when market failures exist?
Answer: Government failure, where political and bureaucratic incentives distort policy
Government failure theory holds that imperfect information, public choice dynamics, and bureaucratic incentives can cause policy interventions to create net social harm.
A policy that imposes a $10 per-unit tax on a good with perfectly inelastic demand will result in:
Answer: The full tax burden falling on consumers with no change in quantity sold
With perfectly inelastic demand the quantity demanded does not change, so sellers can pass the entire tax to buyers as a higher price without losing sales.