| Tools for behavioral models |
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Impact analysis: Behavioral models
Behavioral models assume behavioral responses among households and economic agents. With a price or other policy change, households may change to consuming or producing other goods and services and in doing so move along their respective demand or supply curves. The behavioral models have a purely "micro" focus: supply is not necessarily equated to demand, markets do not clear and prices are therefore not endogenous. Rather, households react to an exogenous policy shock based on behavioral specifications and assumptions. If data, time and capacity permit, behavioral analysis should always supplement simpler incidence analysis to fully understand household responses to policy change.
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