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Sharpening the Effectiveness of Natural Experiments as an Analytical Tool

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  • Duleep, Harriet

    () (College of William and Mary)

Abstract

The importance of using natural experiments in economic research has long been recognized. Yet, it is only in recent years that natural experiments have become an integral part of the economist's analytical toolbox, thanks to the efforts of Meyer, Card, Peters, Krueger, Gruber, and others. This use promises to shed new light on a variety of public policy issues and has already caused a major challenge to some tightly held beliefs in economics, most vividly illustrated by the finding of a positive effect of a minimum wage increase on the employment of low-wage workers. Although currently in vogue in economic research, the analysis of natural experiments could be substantially strengthened. This paper discusses several methodological approaches that would increase the precision and reliability of the results stemming from the analysis of natural experiments. A theme underlying all of these proposals is how best to measure the effect of a treatment on a variable, as opposed to explaining a level or change in a variable.

Suggested Citation

  • Duleep, Harriet, 2012. "Sharpening the Effectiveness of Natural Experiments as an Analytical Tool," IZA Discussion Papers 6682, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp6682
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    References listed on IDEAS

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    1. Jennifer Hunt, 1992. "The Impact of the 1962 Repatriates from Algeria on the French Labor Market," ILR Review, Cornell University, ILR School, vol. 45(3), pages 556-572, April.
    2. Herbert L. Lyon & Julian L. Simon, 1968. "Price Elasticity of the Demand for Cigarettes in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 50(4), pages 888-895.
    3. Nakamura, Alice Orcutt & Nakamura, Masao & Duleep, Harriet Orcutt, 1990. "Alternative approaches to model choice," Journal of Economic Behavior & Organization, Elsevier, vol. 14(1), pages 97-125, September.
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    More about this item

    Keywords

    natural experiments; regression format; treatment effect; precision; extraneous group-specific effects; minimum wage; divorce laws; military service; Julian Simon;

    JEL classification:

    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy

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