Citation

Kuo TC. J. Appl. Econometrics 2011; 27(7): 1100-1115.

Copyright

(Copyright © 2011, John Wiley and Sons)

DOI

10.1002/jae.1243

PMID

unavailable

Abstract

When evaluating the effectiveness of a policy, most studies assume that the policy effect begins with the date of enactment. However, there often exists an endogenous policy lag, due to information acquisition and the cost of adjustment. Meanwhile, the policy impact may be a gradual implementation from one level to another, instead of a one-time shift behavior. To account for these issues when evaluating the Californian under-age drunk driving laws, this paper adopts two econometric techniques: the multiple structural change methodology and the smooth transition method. The methods detect two effective policy changes and also reveal the existence of policy lags. In addition, ignoring these lags leads to severely biased estimates of policy effects. A long transition period is identified for the first under-age drunk driving policy, while an abrupt transition is found for the other. In summary, the paper shows that the two econometric techniques complement each other and will be useful for policy evaluation. Copyright © 2011 John Wiley & Sons, Ltd.