Accounting for Anticipation Effects: An Application to Medical Malpractice Tort Reform
While conducting empirical work, researchers sometimes observe changes in outcomes before adoption of a new treatment program. The conventional diagnosis is that treatment is endogenous. Observing changes in outcomes prior to treatment is also consistent, however, with anticipation effects. This paper provides a framework for comparing the different methods for estimating anticipation effects and proposes a new set of instrumental variables that can address the problem that subjects' expectations are unobservable. The paper uses this framework to analyze the effect of tort reform on physician supply and finds that accounting for anticipation effects doubles the estimated effect of tort reform.
This paper was revised on December 5, 2011
Document Object Identifier (DOI): 10.3386/w16593
Published: Anup Malani and Julian Reif. Interpreting Pre-trends as Anticipation: Impact on Estimated Treatment Effects from Tort Reform, Journal of Public Economics, doi: 10.1016/j.jpubeco.2015.01.001, 124: 1-17 (January 2015)
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