Large Language Models: An Applied Econometric Framework

Understand

Large language models (LLMs) enable researchers to analyze text at unprecedented scale and minimal cost.

• Researchers can now revisit old questions and tackle novel ones with rich data.
• We provide an econometric framework for realizing this potential in two empirical uses.
• For prediction problems -- forecasting outcomes from text -- valid conclusions require ``no training leakage'' between the LLM's training data and the researcher's sample, which can be enforced through careful model choice and research design.