Unnatural experiments? Estimating the incidence of endogenous policies

Abstract

There are numerous empirical studies that exploit variation in policies over space and time in the U.S. federal system. If state policy making is purposeful action, responsive to economic and political conditions within the state, then it is necessary to identify and control for the forces that lead to these policy changes. This paper investigates the implications of policy endogeneity for a specific policy context - workers' compensation benefits. We contrast different methods of estimation and their pros and cons in this context.