NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

External Validity in a Stochastic World

Mark Rosenzweig, Christopher Udry

NBER Working Paper No. 22449
Issued in July 2016, Revised in August 2016
NBER Program(s):Development Economics

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.

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Document Object Identifier (DOI): 10.3386/w22449

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