TP5 GPT

Question 1

Social Cost-Benefit Analysis (CBA)

Answer 1

Comprehensive method for evaluating policies by quantifying and monetizing all benefits and costs. Calculate Net Present Value (NPV) by summing discounted benefits minus discounted costs.

Question 2

Cost-Effectiveness Analysis (CEA)

Answer 2

Evaluates which policy achieves an outcome at the lowest cost. Compute by dividing total costs by units of effectiveness.

Question 3

Discount Rates in Policy Analysis

Answer 3

Convert future costs and benefits into present values using chosen rates based on opportunity cost, intergenerational equity, or time preference.

Question 4

Net Present Value (NPV)

Answer 4

Calculate by summing discounted future benefits minus discounted future costs. Positive NPV indicates beneficial investment.

Question 5

Internal Rate of Return (IRR)

Answer 5

Discount rate making NPV=0. Useful for comparing project profitability and investment viability.

Question 6

Sensitivity Analysis

Answer 6

Test how robust evaluation outcomes are to variations in assumptions or parameters. Identify critical decision-making factors.

Question 7

Randomized Controlled Trials (RCT)

Answer 7

Experimental method randomly assigning subjects to treatment/control groups to isolate causal policy impacts.

Question 8

Internal Validity in RCTs

Answer 8

Confidence that observed outcomes directly result from the policy. Ensured by proper randomization and managing attrition.

Question 9

External Validity in RCTs

Answer 9

Degree to which RCT results can generalize to other contexts. Improved by replication and representative samples.

Question 10

Attrition Bias

Answer 10

Bias from non-random dropout of participants in RCTs. Mitigate through monitoring and intent-to-treat analysis.

Question 11

Difference-in-Differences (DiD)

Answer 11

Estimates policy impacts by comparing outcome changes before/after policy between treated and untreated groups.

Question 12

Parallel Trends Assumption

Answer 12

Essential DiD assumption that treated/control groups would have had identical trends absent intervention. Checked via pre-intervention trend comparison.

Question 13

Calculating DiD

Answer 13

Compute as (Post-Treatment_Treated – Pre-Treatment_Treated) – (Post-Control – Pre-Control). Reveals causal effect.

Question 14

Instrumental Variables (IV)

Answer 14

Use external variable correlated with treatment (not directly outcome) to correct for endogeneity and isolate treatment’s causal effect.

Question 15

Two-Stage Least Squares (2SLS)

Answer 15

IV method: regress treatment on instrument, then regress outcome on predicted treatment.

Question 16

Instrument Validity (Relevance & Exogeneity)

Answer 16

Instrument must strongly predict treatment (relevance) without affecting outcome directly (exogeneity). Test with F-statistics, Hansen tests.

Question 17

Weak Instrument Problem

Answer 17

Occurs when instrument-treatment correlation is weak, producing biased IV estimates. Identified by low F-statistic (<10).

Question 18

Regression Discontinuity Design (RDD)

Answer 18

Estimates causal impact using policy assignment thresholds, assuming groups near cutoff are identical except treatment.

Question 19

Sharp vs. Fuzzy RDD

Answer 19

Sharp RDD strictly assigns treatment by cutoff; Fuzzy RDD allows partial compliance, corrected via IV methods.

Question 20

Bandwidth Selection in RDD

Answer 20

Choice of analysis range around cutoff. Optimal bandwidth balances estimation precision against bias.

Question 21

Vaccination Policy Evaluation

Answer 21

Compare vaccination costs/benefits focusing on effectiveness, cost-effectiveness, and country-specific differences.

Question 22

Discount Rate Justification in Health Policy

Answer 22

Chosen based on ethical considerations and economic conditions like growth or inflation.

Question 23

Infrastructure Evaluation

Answer 23

Assess large projects (e.g., HS2, broadband) by including direct/indirect benefits and long-term social impacts.

Question 24

Clean Power Plan Evaluation

Answer 24

Quantify emissions reduction, compliance costs, health impacts, and distributional effects of environmental policies.

Question 25

Climate Change Policy Evaluation (Stern Review)

Answer 25

Evaluate climate policies emphasizing ethical low discount rates and global long-term risks.

Question 26

Opportunity Cost

Answer 26

Value of next-best alternative use of resources foregone by a chosen policy.

Question 27

Distributional Impacts

Answer 27

Evaluate which societal groups gain or lose from policies, essential for addressing equity.

Question 28

Risk and Uncertainty in Policy Analysis

Answer 28

Incorporate uncertainty through sensitivity analysis, scenarios, or probabilistic methods (e.g., Monte Carlo).

Question 29

Political Feasibility

Answer 29

Assess likelihood of policy adoption considering political support, stakeholder interests, and public acceptance.

Question 30

Confidence Intervals in Policy Evaluation

Answer 30

Statistical ranges indicating precision within which true policy effects likely reside.

Question 31

Standard Errors & Statistical Significance

Answer 31

Measures of estimation reliability. Small standard errors and p-values <0.05 indicate robust results.

Question 32

Propensity Score Matching (PSM)

Answer 32

Create comparable treatment/control groups based on observed characteristics to estimate policy impact.