On the one hand, the structural approach is particularly useful in the presence of feedback loops, or when rational agents can reoptimize in response to large policy shifts. We feel both methodological approaches have important advantages and disadvantages and that each may be better suited to answering particular types of questions. In so doing, we focus our attention on recent examples in environmental and resource economics. In this article, we review some of the primary issues that arise in the implementation of each methodological approach and discuss the advantages and disadvantages of each. While some subfields of economics rely heavily on structural methods (e.g., industrial organization and, more recently, public finance), others tend toward more reduced-form approaches (e.g., labor and development economics). There is an active debate over the advantages and disadvantages of reduced-form versus structural approaches to empirical modeling. Reduced-form studies do, however, require assumptions of their own, e.g., the (quasi) randomness of an experiment with no spillover effects on the control group. The goal of reduced form studies is, conversely, to recover key parameters of interest using exogenous within-sample variation with as few structural assumptions as possible-reducing reliance on these assumptions assists in establishing causality in the relationship of interest. However, many of the assumptions used to recover structural estimates are untestable. These estimates may be required to measure general equilibrium welfare effects or to simulate intricate feedback loops between natural and economic processes. Structural models typically require a theoretical model and explicit assumptions about structural errors in order to recover the parameters of behavioral functions. Both methodologies have their own context-specific advantages and disadvantages, and should be viewed as complements, not substitutes.
We contrast structural and reduced form empirical studies in environmental and resource economics.
0 kommentar(er)
