A major focus of applied econometric work is decision making in the context of uncertainty. Sometimes this work is several steps removed from the actual decision. For example, it may entail providing information in a form more suited to decision making, or reducing the uncertainty in the decision-making environment.
Increasingly, applied econometricians are becoming more directly involved in decision making. The quality and quantity of data available are increasing, while the costs of accessing and using these data are diminishing rapidly. Both public and private sector decision makers are embracing formal methods to measure and control the impact of uncertainty. In this context the incentive to develop and apply econometric tools that use data to better inform decision-making is great. Applied econometricians have responded with new methodologies and with more direct attention to the problems that confront decision makers.
In June 1999 the editors of this issue sponsored a conference on Inference and Decision Making that convened in Rotterdam. The meeting brought together about forty authors and discussants, and focused on seventeen papers responding to the demand for better informing decisions with econometric methods. From the presentation and discussion at the meeting and through subsequent review and revision, the eight articles that comprise this issue were selected.
These articles reยฏect the diversity of decisions that applied econometricians are called upon to inform, and the array of tools that they use in attacking these problems. Five contributions are concerned with public policy decisions. Four of these are related to employment and the labour force. Aico van Vuuren, Gerard van den Berg and Geert Ridder study the impact of the dispersion in unemployment beneยฎts on labour supply, recognizing that wages and productivity levels also vary across jobs and individuals. Yannis Bilias examines the eect of alternative supplements to unemployment insurance on the propensity for returning to work. Todd Stinebrickner models the relationship between the wage structure for public school teachers in the United States and the rate at which they leave teaching for other occupations. Gary Chamberlain studies the persistence in individual earnings beyond that which can be accounted for by age and education. Frank Schorfheide takes up the situation of a monetary authority or macroeconomic policy