A random shock is not random assignment

Christoph Engel ()

Economics Letters, 2016, vol. 145, issue C, 45-47

Abstract: A random shock excludes reverse causality and reduces omitted variable bias. Yet a natural experiment does not identify random exposure to treatment, but the reaction to a random change from baseline to treatment. A lab experiment comparing higher certainty with higher severity of punishment for stealing (holding the expected value of the intervention constant) shows that the difference between the effects of a random shock and random assignment can be pronounced.

Keywords: Identification; Random exposure; Random shock; Natural experiment; Certainty and severity of punishment (search for similar items in EconPapers)
JEL-codes: C01 C12 C90 K14 (search for similar items in EconPapers)
Date: 2016
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