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Counterfactual
In the context of an experiment, the counterfactual refers to the outcome that would have occurred for the treatment group if it had not received the treatment. It represents a hypothetical, 'contrary-to-fact' scenario. For instance, in the German natural experiment, the economic performance of capitalist West Germany (the control group) is used to estimate the counterfactual: how East Germany's economy might have performed if it had not been subjected to central planning.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.1 Prosperity, inequality, and planetary limits - The Economy 2.0 Microeconomics @ CORE Econ
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Divided Germany: A Natural Experiment on Capitalism and Central Planning
Natural Experiments of History (Book)
Counterfactual
Analyzing a Causal Relationship in Housing
A city government unexpectedly decides to build a new subway line that serves only the western half of the city. An economist studies changes in housing prices and commute times in both the western (served by the new subway) and eastern (not served) halves of the city before and after the subway's construction. Which statement best explains why this scenario constitutes a natural experiment?
Analyzing a Minimum Wage Study
A researcher wants to study the effect of a new, optional online tutoring program on students' final exam scores. The researcher compares the scores of students who voluntarily signed up for the program with the scores of those who did not. Why does this research design fail to create a valid natural experiment for determining the causal impact of the tutoring program?
Evaluating a Proposed Natural Experiment on Disaster Impact
A study that compares the long-term health outcomes of individuals who voluntarily adopt a vegetarian diet (the treatment group) against those who do not (the control group) is a valid example of a natural experiment.
Evaluating a Premium Pricing Strategy
A researcher is studying the economic impact of a sudden, city-wide ban on single-use plastic bags. The ban was implemented in City A but not in the neighboring, demographically similar City B. The researcher compares grocery store profits in both cities before and after the ban. Match each term to its corresponding element in this study.
Critiquing a Productivity Study Design
An economist wants to use a sudden change in a state's school funding policy as a natural experiment to study its impact on student graduation rates. The policy increased funding only for schools in counties with populations below 50,000. Arrange the following steps in the logical order an economist would follow to conduct this study.
Learn After
An economist wants to study the impact of a new public transit line on property values in City A. One year after the line opens, they find that property values in neighborhoods near the new line (the 'treatment group') have increased by 15%. To estimate the program's effect, they compare this to City B, a neighboring city without a new transit line, where property values increased by 5% during the same period. The economist concludes the transit line caused a 10% increase in property values. What is the most significant analytical weakness in using City B's performance to determine what would have happened in City A without the transit line?
Evaluating Program Impact
Evaluating a Job Training Program
To measure the true effect of a specific policy or event (the 'treatment'), economists need to estimate what would have happened without it. This hypothetical outcome is what the 'treatment group' would have experienced in the absence of the treatment. Match each scenario describing a treatment with the most appropriate comparison group that could be used to estimate this hypothetical outcome.
In a well-designed experiment intended to measure the impact of an intervention, the observed outcome of the control group is the actual, true counterfactual for the treatment group.
The Challenge of the Counterfactual
To isolate the true causal effect of an economic intervention (the 'treatment') on a specific group, economists must estimate the outcome that this group would have experienced in the absence of the intervention. This unobserved, hypothetical outcome is known as the ____.
An economist is tasked with determining the causal effect of a new targeted tutoring program on the exam scores of struggling students. Arrange the following steps into the correct logical order an economist would follow to estimate the program's impact by constructing a hypothetical scenario for what would have happened without the program.
Evaluating a Congestion Pricing Policy
A researcher studies the effect of a new fertilizer on corn yield. They use two identical fields: Field A receives the new fertilizer and yields 120 bushels, while Field B does not receive the fertilizer and yields 100 bushels. In the context of this experiment, what is the counterfactual?