@techreport{NBERw14399,
 title = "Sufficient Statistics for Welfare Analysis: A Bridge Between Structural and Reduced-Form Methods",
 author = "Raj Chetty",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "14399",
 year = "2008",
 month = "October",
 URL = "http://www.nber.org/papers/w14399",
 abstract = {The debate between "structural" and "reduced-form" approaches has generated substantial controversy in applied economics.  This article reviews a recent literature in public economics that combines the advantages of reduced-form strategies -- transparent and credible identification -- with an important advantage of structural models -- the ability to make predictions about counterfactual outcomes and welfare. This recent work has developed formulas for the welfare consequences of various policies that are functions of high-level elasticities rather than deep primitives.  These formulas provide theoretical guidance for the measurement of treatment effects using program evaluation methods.  I present a general framework that shows how many policy questions can be answered by identifying a small set of sufficient statistics.  I use this framework to synthesize the modern literature on taxation, social insurance, and behavioral welfare economics.  Finally, I discuss topics in labor economics, industrial organization, and macroeconomics that can be tackled using the sufficient statistic approach.},
}