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External Validity in a Stochastic World

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  • Mark Rosenzweig
  • Christopher Udry

Abstract

We examine the generalizability of internally valid estimates of causal effects in a fixed population over time when that population is subject to aggregate shocks. This temporal external validity is shown to depend upon the distribution of the aggregate shocks and the interaction between these shocks and the casual effects. We show that returns to investment in agriculture, small and medium enterprises and human capital differ significantly from year to year. We also show how returns to investments interact with specific aggregate shocks, and estimate the parameters of the distributions of these shocks. We show how to use these estimates to appropriately widen estimated confidence intervals to account for aggregate shocks.

Suggested Citation

  • Mark Rosenzweig & Christopher Udry, 2016. "External Validity in a Stochastic World," NBER Working Papers 22449, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:22449
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    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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