Accounting for anticipation effects

Anup Malani

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. While conducting empirical work, researchers sometimes observe changes in behavior before the adoption of a new treatment program or policy. The conventional diagnosis researchers make is that the treatment is endogenous. Observing behavioral changes prior to treatment is also consistent, however, with anticipation effects. In this paper we provide a framework for comparing the different methods for estimating anticipation effects and propose a new set of instrumental variables that can address the problem that subjects' expectations are unobservable. We use our framework to analyze the effect of tort reform on physician supply. We find that accounting for anticipation effects doubles the estimated effect of tort...