External Validity in a Stochastic World

45 Pages Posted: 29 Jul 2016

See all articles by Mark R. Rosenzweig

Mark R. Rosenzweig

Yale University - Economic Growth Center; Yale University - Cowles Foundation

Christopher Udry

Northwestern University

Multiple version iconThere are 2 versions of this paper

Date Written: July 2016

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.

Keywords: returns to investment, heterogeneity, treatment effect

JEL Classification: C93, D14, G21, O12, O16

Suggested Citation

Rosenzweig, Mark Richard and Udry, Christopher, External Validity in a Stochastic World (July 2016). Yale University Economic Growth Center Discussion Paper No. 1054, Available at SSRN: https://ssrn.com/abstract=2815079 or http://dx.doi.org/10.2139/ssrn.2815079

Mark Richard Rosenzweig

Yale University - Economic Growth Center ( email )

Box 208269
New Haven, CT 06520-8269
United States
203-432-3620 (Phone)

Yale University - Cowles Foundation

Box 208281
New Haven, CT 06520-8281
United States

Christopher Udry (Contact Author)

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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