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?