Natural Experiments in Economics

Divided Germany: A Natural Experiment on Capitalism and Central Planning

Berlin Wall: Economic Consequences of Political Division

Which of the following best explains the role of institutions and culture in economic growth during the Industrial Revolution?

What is a natural experiment in the context of studying economic growth?

How did the Enlightenment contribute to economic growth during the Industrial Revolution?

Which of the following statements best describes the relationship between capitalism and the Industrial Revolution?

Analyzing the Causes of Sustained Economic Growth

The Causality Dilemma in Economic History

An economic historian argues that the rapid economic growth starting in the 18th century was primarily driven by a new legal framework that protected inventions with patents and enforced contracts, which encouraged individuals and firms to invest in new technologies and business ventures. This argument emphasizes which of the following as the main cause of the 'hockey stick' growth?

Evaluating Historical Economic Arguments

Economists and historians debate the primary cause of the sustained economic growth that began in the 18th century. Match each piece of historical evidence or argument below to the explanation it best supports.

The fact that the 'hockey stick' of economic growth began around the same time that both capitalist institutions were established and a major cultural shift was occurring definitively proves that one of these factors must be the sole cause of the growth.

Mechanisms of Economic Growth under Capitalism

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.

Divided Germany: A Natural Experiment on Capitalism and Central Planning

Findings from Dell's Study on the Mita System's Lasting Effects

Divided Germany: A Natural Experiment on Capitalism and Central Planning

Discontinuity Technique in Econometrics

Geographic Boundary as a Discontinuity in the Mita Study

A study investigated the long-term economic impact of a historical forced labor system by comparing outcomes in villages just inside the system's geographic boundary with villages just outside of it. Why is this specific comparison of adjacent villages a methodologically sound approach for identifying the system's true effects?

Designing a Historical Impact Study

A study examines the long-term economic impact of a historical forced labor system by comparing outcomes in communities located just inside the system's geographic boundary with communities located just outside of it. The logic is that communities near the boundary are similar in most respects, except for their historical exposure to the system. Which of the following potential issues represents the most significant threat to the validity of this research design's conclusion?

Evaluating Alternative Research Designs

A historical study analyzed the long-term effects of a forced labor system by comparing communities on either side of the system's fixed geographic boundary. Match each element of this research design with its correct description in the context of the study.

In a study analyzing the long-term effects of a historical forced labor system defined by a geographic boundary, the most robust comparison for establishing a causal link would be between a randomly selected community deep within the boundary and a randomly selected community far outside of it.

Controlling for Confounding Variables

A researcher wants to use a historical geographic boundary to isolate the long-term causal effects of a specific policy that was applied to only one side. Arrange the following steps into the correct logical sequence for conducting this type of study.

Critique of a Proposed Research Design

A study uses a historical geographic boundary to analyze the long-term impact of an economic system that was applied only to communities on one side. The analysis reveals a sharp drop in household wealth for communities located just inside the boundary compared to those just outside. For this 'discontinuity' in wealth to be validly interpreted as the causal effect of the historical system, which of the following must be the most critical assumption?