<p>I was reading this sentence &quot;As we discuss later in Section 8, IO economists have developed a variety of structural models of auction bid data. These models have been used to derive causal models of the equilibrium relations between winning bids and the number of bidders&quot; and it made me realize that I do not understand well enough the difference between a structural model and a causal model.</p>
<p>Having gotten a better understanding of the difference from having watched the video (by David Card) in the link, I am sharpening my question a bit.</p>
<p>I want to look at this structural model, which explain the structure of the demand function and of the supply function.
<span class="math-container">$$q_t^d=\alpha_1-\beta_1p_t$$</span>
<span class="math-container">$$q_t^s=\alpha_2+\beta_2p_t$$</span>
<span class="math-container">$$q_t^d=q_t^s$$</span></p>
<p>Using the definition of causality David Card ascribes to Heckman (&quot;causality is model based&quot;) if we tacked an error term to each equation and estimated them simultaneously, the coefficients <span class="math-container">$\beta_1$</span> and <span class="math-container">$\beta_2$</span> would have causal interpretations; this of course assumes that the structural model is correct, which we have good reasons to be skeptical about.</p>
<p>Using the design-based definition of causality that David Card ascribes to Holland (requires manipulation/intervention) we would conclude that <span class="math-container">$\beta_1$</span> and <span class="math-container">$\beta_2$</span> are not estimates of causal parameters because we are not controlling for things like income, prices of substitutes, etc.</p>
<p>Did I describe structural equations and causal models correctly?</p>
<p>Source:  <a href="https://web.stanford.edu/group/fwolak/cgi-bin/sites/default/files/files/Structural%20Econometric%20Modeling_Rationales%20and%20Examples%20From%20Industrial%20Organization_Reiss%2C%20Wolak.pdf" rel="nofollow noreferrer">source for the sentence</a></p>

CC BY-SA 4.0
2021-11-10T12:37:52.080Z
I think Card explained it nicely in his lecture on design- vs. model-based approaches https://www.youtube.com/watch?v=S6xSEiB6E2s&t=41s
Papayapap
CC BY-SA 4.0
2021-11-10T15:30:51.443Z
Thank you for the reference; a really informative video; I learned a lot from it.
ColorStatistics
<causal-inference><structural-estimation>
Difference between a structural and a causal model in economics
ColorStatistics
# Difference between a structural and a causal model in economics

(Asked by: username_0 on 2021-11-10)

I was reading this sentence "As we discuss later in Section 8, IO economists have developed a variety of structural models of auction bid data. These models have been used to derive causal models of the equilibrium relations between winning bids and the number of bidders" and it made me realize that I do not understand well enough the difference between a structural model and a causal model.

Having gotten a better understanding of the difference from having watched the video (by David Card) in the link, I am sharpening my question a bit.

I want to look at this structural model, which explain the structure of the demand function and of the supply function.
$$q\_t^d=\alpha\_1-\beta\_1p\_t$$
$$q\_t^s=\alpha\_2+\beta\_2p\_t$$
$$q\_t^d=q\_t^s$$

Using the definition of causality David Card ascribes to Heckman ("causality is model based") if we tacked an error term to each equation and estimated them simultaneously, the coefficients $\beta\_1$ and $\beta\_2$ would have causal interpretations; this of course assumes that the structural model is correct, which we have good reasons to be skeptical about.

Using the design-based definition of causality that David Card ascribes to Holland (requires manipulation/intervention) we would conclude that $\beta\_1$ and $\beta\_2$ are not estimates of causal parameters because we are not controlling for things like income, prices of substitutes, etc.

Did I describe structural equations and causal models correctly?

Source: [source for the sentence](https://web.stanford.edu/group/fwolak/cgi-bin/sites/default/files/files/Structural%20Econometric%20Modeling_Rationales%20and%20Examples%20From%20Industrial%20Organization_Reiss%2C%20Wolak.pdf)

**Tags:** causal-inference, structural-estimation

> **Comments:**
> **username_1**: I think Card explained it nicely in his lecture on design- vs. model-based approaches https://www.youtube.com/watch?v=S6xSEiB6E2s&t=41s  
> **username_0**: Thank you for the reference; a really informative video; I learned a lot from it.  

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## 0 answers

