Natural Experiments in Macroeconomics

Date: 2015-05
By: Fuchs-Schündeln, Nicola
Hassan, Tarek
A growing literature relies on natural experiments to establish causal effects in macroeconomics. In diverse applications, natural experiments have been used to verify underlying assumptions of conventional models, quantify specific model parameters, and identify mechanisms that have major effects on macroeconomic quantities but are absent from conventional models. We discuss and compare the use of natural experiments across these different applications and summarize what they have taught us about such diverse subjects as the validity of the Permanent Income Hypothesis, the size of the fiscal multiplier, and about the effects of institutions, social structure, and culture on economic growth. We also outline challenges for future work in each of these fields, give guidance for identifying useful natural experiments, and discuss the strengths and weaknesses of the approach.
Keywords: Civic Capital; Fiscal Multiplier; Institutions; Multiple Equilibria; Networks; Permanent Income Hypothesis; Social Structure; Social Ties; Trust
JEL: C1 C9 E21 E62 H31 O11 O14 O43 O50

Pigs in Cyberspace: A Natural Experiment Testing Differences between Online and Offline Club-Pig Auctions

Date: 2011-04
By: Roe, Brian E.
Wyszynski, Timothy E.
We find sale prices and net revenues received by sellers in the Midwestern club pig market are higher at traditional face-to-face auctions than at comparable Internet auctions. The comparison overcomes adverse selection issues that commonly plague such analyses by using data from sellers that allocated pigs to both markets based solely on exogenous differences in dates between online and offline auctions. Furthermore, both auctions feature ascending price formats with âsoft-endingsâ and remaining quality variation is controlled by using detailed information on animal, seller and event characteristics. The results suggest that the higher prices and net revenues from traditional auctions are attributable to remaining differences in auction format and buyer pools. Furthermore, sellers may be willing to forgo higher revenues to capture the convenience and flexibility provided by Internet auctions, to reach buyers in other regions that face different seasonality in demand and to stimulate demand for privately negotiated sales.
Keywords: auctions, electronic commerce, two-sided markets, livestock marketing, hedonic models, Agribusiness, Industrial Organization, Livestock Production/Industries, Marketing, D44, Q13,