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Unexpected Inheritance as a Natural Experiment for Credit Constraints
The receipt of an unforeseen inheritance can be utilized as a natural experiment to examine the effects of credit constraints. Since the inheritance is an unexpected event, it is considered 'as good as randomly assigned,' which allows for the study of its impact on individuals who might be limited by their access to credit. For instance, studies indicate that receiving an inheritance substantially increases the likelihood of an individual starting a new business or expanding an existing one, which implies that a lack of capital was a significant prior constraint. [2, 4, 9, 10]
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.9 Lenders and borrowers and differences in wealth - The Economy 2.0 Microeconomics @ CORE Econ
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Unexpected Inheritance as a Natural Experiment for Credit Constraints
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Evaluating a Research Design
Identifying the Components of a Natural Experiment
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Designing a Natural Experiment for Policy Analysis
A large corporation introduces a voluntary, company-funded financial wellness program. To measure its effectiveness, an economist compares the average savings rate of employees who chose to participate in the program with the average savings rate of those who did not. This research design is a valid example of a natural experiment.
Learn After
British Study on Inheritance and Entrepreneurship (Blanchflower & Oswald, 1998)
Study on Inheritance and Transitions to Self-Employment (Holtz-Eakin, Joulfaian, & Rosen, 1994)
An economist observes that individuals who receive a sudden, unexpected financial windfall are significantly more likely to start their own business within the following year compared to a demographically similar group of individuals who did not receive such a windfall. What is the most robust economic conclusion that can be drawn from this observation?
Evaluating a Research Design for Financial Constraints
Critiquing the Inheritance-as-Experiment Model
The Logic of Using Inheritance as a Research Tool
The primary reason that receiving an unexpected inheritance is a useful natural experiment for studying credit constraints is that the amount of the inheritance is typically large enough to fund a new business.
Match each component of a study using inheritance to understand financial constraints with its corresponding role or interpretation in the research design.
When economists use the receipt of an unexpected inheritance as a natural experiment, they are typically investigating the impact of __________ on individual economic behavior, such as entrepreneurship.
Analyzing a Flawed Research Design
Interpreting Scenarios of Financial Windfalls
A researcher is using the receipt of an unexpected inheritance as a natural experiment to test the hypothesis that some potential entrepreneurs are credit-constrained. Arrange the following statements into the correct logical sequence that outlines the research process and its conclusion.