A Random Shock Is Not Random Assignment

12 Pages Posted: 3 Jun 2016

See all articles by Christoph Engel

Christoph Engel

Max Planck Institute for Research on Collective Goods; University of Bonn - Faculty of Law & Economics; Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students; Universität Osnabrück - Faculty of Law

Date Written: May 2016

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

JEL Classification: C01, C12, C90, K14

Suggested Citation

Engel, Christoph, A Random Shock Is Not Random Assignment (May 2016). MPI Collective Goods Preprint, No. 2016/09, Available at SSRN: https://ssrn.com/abstract=2788694 or http://dx.doi.org/10.2139/ssrn.2788694

Christoph Engel (Contact Author)

Max Planck Institute for Research on Collective Goods ( email )

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University of Bonn - Faculty of Law & Economics

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Erasmus University Rotterdam (EUR), Erasmus School of Law, Rotterdam Institute of Law and Economics, Students ( email )

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Universität Osnabrück - Faculty of Law

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Germany

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