A Random Shock Is Not Random Assignment
12 Pages Posted: 3 Jun 2016
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: Suggested Citation